Don’t let anyone tell you that making a successful succession plan for a family business is easy. It’s certainly not. The combination of family dynamics and the needs of the business can lead to difficulties that are far beyond those faced by the owners of non-family businesses.
At one time succession in some family businesses may have been built around the idea that leaders from the next generation would simply step into the shoes of their predecessors and run the business (and perhaps the family) exactly as mother or father had done. But that notion fails to recognise that each generation has different skills, aspirations and interests to the last one, and that business conditions and needs inevitably shift over time.
When a family business assumes that the next generation can simply take over from the last without pausing to consider these issues, it is dicing with danger. A business looking for a prosperous future needs to take professional advice from experienced advisors. This will open up the process of consultation and discussion that can be so important in navigating a way forward.
Professional advice will also focus on making the succession plan as tax efficient as possible. Usually, the main problem areas will be Capital Gains Tax and Gift or Inheritance Tax. The advisors’ focus will be on using statutory reliefs such as Retirement Relief, to enable the owners to minimise or avoid Capital Gains Tax, and Business Relief, to allow the next generation to succeed to the business without a crippling Gift Tax liability.
Very often the business will not be an exact fit for either or both of these reliefs and a tax plan will need to be devised to meet the family’s needs. Here, tax traps will lie in wait for the unwary, so it is essential to use expert and experienced tax advisors.
We have many years’ experience in advising at every level on the business and tax aspects of business succession If you would like to open a discussion about your business succession planning, feel free to contact either Joe McAvoy, Director of Tax Services, or Shane Carroll, Director of Business Advisory .