Background

Mr and Mrs Jones owned a £5 million investment company with a substantial buy-to-let portfolio.

They each held 50 of its 100 ordinary shares.

Now in their 60s, they wanted to involve their four adult children and reduce their IHT exposure.

Solution

The share capital was reorganised to bring the children into the company without triggering a deemed market-value disposal for CGT.

Two share classes were created:

• A shares: retained by Mr and Mrs Jones, with voting and dividend rights but capital value capped at a £5.5 million hurdle.
• B shares: subscribed for equally by the four children, carrying voting and dividend rights plus all growth above £5.5 million.

The hurdle exceeded the company’s existing £5 million value, preventing an immediate value shift for CGT purposes.

Outcome

Future growth above £5.5 million moved to the children’s estates, limiting the parents’ IHT exposure. They also transferred £650,000 of A shares into a discretionary family trust. After seven years, this value falls outside their estates, while they retain control as trustees and can benefit future generations.

The children became directors, received modest salary and pension contributions, and gained practical responsibility for managing family wealth—strengthening succession while preserving family oversight.

The above is an example of what could be achieved with an established company. However, no two cases are the same, and advice should be obtained suitable to individual goals and objectives.