Transferring ownership should be done as tax efficiently as possible, but, taking a decision to exit may not be as straightforward as many families expect.
Key questions to focus on are “what specifically is on offer for sale?”, and “what will a purchaser want to buy?”
Many deal processes suffer delays, or heavy tax consequences, as the deal parameters become unclear because of non-trading assets. It is very common, although unwise from a tax perspective, to invest in non-core assets within a trading group. Many of the generous tax reliefs available to the company – and the shareholders - can be wiped out due to the way assets are structured.
Equally, removing assets during the heat of M&A exit processes is, at best, painfully time consuming and, at worst, expensive from a tax leakage perspective. Removing non-core assets from a trading group can often be undertaken tax efficiently, but it requires careful attention to detail and plenty of time to the relevant seek HMRC approvals.
Think in advance of removing non-core assets, not just from a tax efficiency perspective, but from the perspective of good corporate governance.
Tidying up non-core assets is just one area to think about, there are plenty of others which need some consideration.
The most common are legal entity structures and the need to be part of one corporate group. Consider how does the family owns their shares. If this can be done via their own UK Family Investment Companies then this provides considerable upsides for the whole family – not just those running the business.
It’s also important to properly plan how the current generation running the business can de-risk and take earnings out of the business tax efficiently.