The Business Lifecycle & Tax Planning Strategies for Business Owners Part 2

The Business Lifecycle & Tax Planning Strategies for Business Owners Part 2 | Webinar Recording

In brief

• This page is a written companion to a second webinar on business tax planning, and focuses on specific strategies for owners.
• The main strategies cover group structures, moving value to family members, funding, and the choice of exit.
• Each strategy depends on the facts and on the timing.
• Some strategies must be started well before a sale to qualify for reliefs.

Group structures

A group structure puts a holding company above one or more trading companies. Dividends from the trading company to the holding company are usually exempt from corporation tax, so cash can move up the group without tax. The holding company can then lend, invest or distribute. Selling a subsidiary may qualify for the substantial shareholdings exemption, which can remove the gain in the company if the conditions are met. The route to creating a group needs care. See our page on corporate restructuring.

Separating risk and assets

Owners can place property, intellectual property or surplus cash in separate companies, which protects those assets from the risks of the trade. A linked investment company can hold surplus funds while the trading company continues to qualify as a trading company. See our page on the linked investment company.

Bringing in family

Shares can be given to a spouse, adult children or a trust. The reasons are commercial, such as succession, and tax, such as using lower tax bands and starting the clock on the seven-year rule. Gifts of shares may create Capital Gains Tax, but relief by holding over the gain is available for trading company shares in many cases. Dividend arrangements must be real, since HMRC can challenge them.

Funding growth

Growth can be funded from retained profit, bank debt, shareholder loans or outside investment. Each has a tax effect. Interest on business loans is deductible for the company. Outside investors may look for EIS or SEIS relief, which has conditions the company must meet. See our page on EIS and SEIS.

Choosing the exit

The choice of exit affects how much is paid in tax, the timing and the control the owner keeps. Options include a trade sale, a management buy-out, an Employee Ownership Trust, a demerger or a family succession. Business Asset Disposal Relief applies at 18% to the first £1 million of qualifying gains, with the lifetime limit falling to £500,000 for disposals from 6 April 2027.

Frequently asked questions

Can I move a trading business into a group without tax?

In many cases yes, using a share exchange with clearances where needed. The details differ by case.

Should I give shares to my children?

It can help succession, but the commercial and tax effects must be considered together.

Is an exit plan fixed?

No. It should be revisited as the business changes.

If you would like to talk this through for your own situation, book a free call with our team.