Planning ahead – avoiding unnecessary tax charges
Review your Company Articles for Inheritance Tax and succession planning. Should there be a mechanism so that if a business partner dies, the remaining partners can buy their interest? This is possible, but the provisions need to be drafted with care. If the buy-out is automatic on death then Inheritance Tax relief at 100% on the trading company shares can be lost, creating an unnecessary tax charge at 40% on death. Also consider whether shares can be freely sold during lifetime, or whether they can only be passed through the family. Can spouses hold shares and work in the business? If they can then it can impact upon how divorce claims are assessed.
For more information, please contact a member of our team.