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Family Investment Companies
Gifting shares to the next generation
How could future tax reform affect family businesses?
85% of UK businesses are family owned making them the backbone of the UK economy (Institute for Family Business, 2018). However, they are not without their own unique set of challenges. Many of our family businesses are multi-generational therefore managing and nurturing the family relationships is really important, particularly when looking at succession; this is something our team do very well. Our team provides family business clients with a personalised service ensuring the business thrives as well as meeting the personal needs of the family.
Our client is a property based consultancy business established by the father who was retired, with the business now being run by his daughter.
The father owned all the shares which was a disincentive to his daughter, and any profits would be distributed by dividend to the father. Instead, bonuses were being paid to daughter which was not tax-efficient.
We restructured the business to move control to the daughter through a tax-efficient share buyout. This enabled the father to claim Entrepreneurs’ Relief, while retaining an income stream from the business. Care was taken to ensure Inheritance Tax would not be an issue. The daughter split her shareholding with her husband, taking advice from local matrimonial and corporate lawyers which we introduced, and is now able to extract profit by way of dividend each year saving thousands of tax.
The daughter now has a business she can run and grow, and benefit from the actions that she takes. The father, who is retired, does not need to worry about the business any more, but has a secure income stream to support his income in retirement.
Our next step is introducing further key staff into the share structure, through a tax-efficient Employment Management Incentive scheme.