When considering your business interests and strategy for the future make sure that the businesses in which you are interested are properly equipped for the unexpected and make the most of the Inheritance Tax reliefs available.

Our specialist estate planners work closely with our corporate colleagues to provide planning advice to business owners. Consider the following:-

1.Make a Will/update your existing Will

Your Will can be used as a planning tool, not only to make sure that you leave your business assets to beneficiaries of your choosing but also to make sure that you make the most of the Inheritance Tax reliefs available on your business assets.  Under your Will you can also ensure that you choose executors who understand your business affairs and who can either take over the running of your business on your death or properly transfer your shares in a business to your beneficiaries. Make sure that your Will terms are reflected in the constitution of your business. If there is a conflict between the two then this will make matters difficult for the executors after your death and may mean that your wishes are not effected.

2. Inheritance Tax and Business Property Relief 

Subject to certain reliefs and exemptions, Inheritance Tax is charged at a rate of 40% on the value of your estate over and above the nil rate band (presently £325,000) on your death. One relief available is Business Property Relief. This relief can operate to reduce the value of your business property by up to 100% when calculating any Inheritance Tax due which can represent a significant tax saving.  As with all tax reliefs, there are a number of tests that need to be satisfied. Make sure that the structure of your business and any corresponding shareholders/partnership agreements do not unwittingly jeopardise your estate's ability to claim this relief and that your business is organised to make the most of the tax reliefs available.

3. Exit strategy

When considering your exit strategy think long-term and take advice in advance. With some careful planning you could transfer assets out of your estate to the next generation with significant Inheritance Tax savings. You must always check that the constitution of the business allows for such transfers to take place.

4. Plan for the unexpected

Make sure that the organisation of your business is structured to cater for the worst case scenario such as sudden death or incapacity. You will need to ensure that the appropriate authorities are in place so that someone else can continue to run it on a day to day basis.  Make sure your business and other directors and senior management have the appropriate insurances (such as keyman insurance or life cover), option agreements, articles of association and powers of attorney in place to make sure that your business has the best chance of continuing to run successfully and no one will be left financially high and dry if something  happens to you.  Ensure that the constitution of a company in which you have shares, permits the transfer of those shares to your beneficiaries with ease.

5. Take advice

Take legal and tax advice to make sure your business affairs are in order to avoid problems at what will be a difficult and emotional time for your family and your business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.