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What will happen to your business after your death?

You’ve worked hard to make your business a success, but have you thought about how it will continue to benefit your family after your death?

It’s important to consider your family dynamics and to identify who would be comfortable and capable of continuing to run the business successfully. It’s likely you will also have co-owners and valued employees to think about, who have helped you get to where you are today.

Equally importantly, do you understand the tax implications of business succession?

Business Property Relief (BPR) enables qualifying businesses to pass through generations without Inheritance Tax (IHT) penalties. IHT can be more punitive than either income tax or capital gains tax, so it’s important to do what you can to ensure your business qualifies.

As BPR is usually not assessed by the Revenue until after your death, it is advisable to have the likely level of BRP assessed by an accountant and to take advice from a corporate lawyer, who will maximise your chances of obtaining it.

The Revenue may provide pre-death clearance but only in limited circumstances, such as where the applicant demonstrates that there is material uncertainty over the application of the law and that the issue is commercially significant to the business.

BPR can be recycled and effectively used twice, through a process known as ‘double-dipping’. Family members can purchase BPR qualifying assets from a trust set up by you. The family members then receive BPR qualifying assets and the cash paid to the trust to purchase them immediately falls out of their estates for IHT purposes.

It is also advisable for non-business owners to utilise BPR. Assets invested on the Alternative Investment Market (AIM) become subject to 100% BPR after just two years of ownership. The two-year period can be rolled forward to a surviving spouse or civil partner, so a death within two years of investing does not always lead to a loss of BPR.

Remember, care should be taken when giving away business assets, as additional IHT can be payable if the giver dies within seven years of the gift.

To find out more about BPR, IHT and the implications for your business and estate, contact Rick Bunch on 01625 585404 or email rick.bunch@chlsolicitors.co.uk

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