Passing a business to the next generation

Passing a business to children involves transferring leadership, ownership, or both — usually in stages. The commercial and family questions deserve as much attention as the tax ones.

What has to be in place before transfer?

• A willing successor with demonstrated capability
• Agreement on roles: who leads, who owns, who advises
• Governance: board, shareholders' agreement, reporting
• A view of value, agreed or independently supported
• Consideration of other shareholders and family members

Why transfer gradually?

Staged transfer of management responsibility, followed or accompanied by staged transfer of shares, lets the successor build credibility with staff, customers and lenders while the outgoing owner remains available.

Why does valuation matter in a family transfer?

Even where no money changes hands, value affects fairness between siblings, the tax treatment of a gift or sale, and the terms on which other shareholders participate.

What are the tax considerations?

Transfers of shares to family can give rise to capital gains tax and inheritance tax consequences. Reliefs may be available depending on the type of business, the structure of the transfer and the rules in force at the time; these rules change. Take specialist tax advice before any transfer.

This guide is general information only. It is not tax, legal or financial advice. Ownership transfers have tax and legal consequences that depend on structure and circumstances — take advice from appropriately qualified professionals before acting.