Helping you prepare for a business exit

If you are considering exiting your business in the near, or not so near, future, it is worth giving thought to both your own tax position and that of your company. The earlier you consider the position, the greater the opportunity to put in place solutions in a cost-effective manner.

We set out below some of the more common areas where advice is often sought to give you a flavour of how we can support you.

Inheritance Tax and Capital Gains planning

As you approach a sale or other exit event you need to consider your potential exposure to Capital Gains Tax including your eligibility for reliefs such as Business Asset Disposal Relief. You may be offered deferred consideration such as loan notes or shares in the acquiring entity and will require help to steer you through the tax complexities arising from that, including applying for any necessary clearances from HMRC. If you are keen to pass wealth down to the next generation, it can also be a good time to consider gifting part of your shares. In order to retain a degree of control, which may be particularly important as you move through the sale process, gifting into trust may be considered. Consideration of the tax issues arising from that is an important aspect which we are able to advise on, as well as helping you set up the trust and assist with ongoing compliance.

If you do not immediately need some or all of the proceeds from a business exit you could instead consider incorporating a family investment company. This could allow you to retain disposal proceeds from the sale of your business in a tax efficient manner, which can then be used to fund future investments benefitting future generations.  

In addition, you might want to consider opportunities for charitable giving and the tax reliefs that may be available.

Everyone is different. Your ambitions and family situations will reflect your own circumstances and strategy. Although we can suggest a range of solutions that may work for you, the key is for us to understand what you wish to achieve. This is why we spend time getting to know you, so that we are excellently placed to propose sensible suggestions that meet your needs, now and in the future, rather than pushing the latest tax planning fads.

Preparing your company for sale

Companies evolve over time. What may have started as a single company with a single business, can quickly morph into a corporate group carrying on numerous businesses. Investments may have also been made within the corporate structure and, when you are considering finally disposing of your company, there may be certain discrete businesses or assets that you would ideally wish to retain.

It is possible to remove property, or shares in a subsidiary, just before you dispose of the main company or group, but this can trigger Corporation Tax, Stamp Duty or Stamp Duty Land Tax. Therefore, considering these issues well in advance of any sale, can give you an opportunity to tidy the corporate group up, and, if required, move assets around in a tax efficient manner.

As well as tidying up your business to make it ready for a future sale, it may also be prudent to check that the company’s tax affairs are all in order.

For example, we can review your company’s tax position and suggest reliefs that may benefit from an additional review. For example, we could introduce you to our capital allowances specialist to review the capital allowances position to ensure that all potential claims have been made and that such claims have been maximised.

Similarly, if your company engages consultants (directly or via their own vehicle), a review of the arrangements should establish if they are supportable and/or if the company may have payroll exposures. Carrying out a ‘health check’ should give the company scope to address potential areas of risk in advance of a future exit, including the implementation of compliant arrangements.

Shareholders based overseas may have additional considerations and our international private client team can assist with these.

Reviewing and implementing employee incentive arrangements

When preparing for an exit it is important to consider whether any promised share awards have not been issued. Similarly, as you approach a potential exit, there may also be other key employees that you wish to reward. It is often preferable to deal with such share awards or share option schemes well in advance of a disposal or, at the very least, consider the options that are available at an early stage.

If you have existing share incentive schemes such as enterprise management incentives options, it would also be prudent to undertake a review of these to ensure that they are still fit for purpose, that all filings have been made to date, and generally confirm that any future purchaser is unlikely to have any material concerns in this area. Key areas will be to ensure that there are no unforeseen tax and national insurance exposures (including for the employer) and to address tax-inefficient arrangements by implementing revised awards.

You may want to explore as an alternative to a third-party exit (or trade sale) the sale of a controlling interest (of at least 50% of the shares) to an Employee Ownership Trust. Employee ownership is a radically different form of ownership structure for the future of your company and staff.  It also offers selling shareholders the ability to obtain a capital gains free disposal if certain conditions are satisfied.  Employee ownership may not be for everyone, but it is an alternative that you may want to consider as a future exit for your business.

In each case, it is best to consider these matters at the earliest opportunity, and our employee incentives team is ideally placed to help guide you through the most appropriate options.

Next steps

The Birketts Tax Group has a wealth of experience providing tax advice to entrepreneurs, business owners and business investors in relation to both their personal tax position and that of their company or group. This ranges from personal tax planning and company reorganisations, to designing and implementing employee incentives.

We offer a bespoke service to review how your current personal and business situation meets your aims for the future, and then provide sensible suggestions to meet your ambitions in a tax efficient manner.

If you are considering a business exit or would like any other advice, either in relation to your personal tax position or that of your company, please do not hesitate to contact one of our team members.