If you are a business owner the likelihood is your business will form a significant part of your estate, together with other assets, such as your home or investments. It is vital to plan for the future to safeguard your family, loved ones, and your business, by signing a Will that works for you as a business owner.
Contact our team today to find out how we can help you.
Leaving your business as an inheritance
Leaving your business as an inheritance is not something to be done lightly. You need to consider whether you want to leave your shares in your business to a named individual, to a group of family members, or in trust as an inheritance tax-efficient means of passing your business onto the next generation.
Passing your business on requires preparation so your business can survive the transition, with corporate and estate planning advice so your shareholder agreement works in conjunction with your Will and your inheritance tax (IHT) strategy. Specialist Will solicitors can work with your corporate lawyers and financial advisors, so you have the right paperwork and insurance in place to protect your business if either you or a fellow shareholder passes away or is incapacitated.
Inheritance tax and business relief
Business owners may qualify for business relief, so IHT is not payable or is reduced when a business interest is passed on either through lifetime gifting or estate planning.
Your business assets will only qualify for IHT business relief if you owned your business or the business asset for at least two years before your death. The relief can be claimed at 100% or 50%, reducing the value of your business assets by that percentage depending on the nature of the asset.
Business relief at 100% is available on:
- A business or an interest in a business
- Shares in an unlisted company
Business relief at 50% of the market value of the business asset is available for:
- Shares that control more than 50% of the voting rights in a listed company
- Land, buildings, or machinery owned by you and used in a business in which you were a partner or controlled land, buildings, or machinery used in the business and held in a trust that it has the right to benefit from
A probate solicitor will help the executor of a Will claim the appropriate rate of business relief when calculating the estate’s liability to IHT and they will apply for probate so that the estate can be administrated and distributed to the beneficiaries.
The complexities of business relief
Business relief is complicated as it can only be claimed against specific assets when you are a business owner engaged in lifetime gifting or estate planning.
Business relief cannot be claimed if the business:
- Is being sold unless the sale of the business is to a company that will carry on trading and the estate will mainly be paid in shares of that company
- The business is mainly engaged in dealing with securities, stocks or shares, land or buildings, or making or holding investments
- Is a not-for-profit organisation
When it comes to specific business assets your executor cannot claim business relief on business assets in a range of circumstances, including:
- The asset was not used mainly for business purposes in the two years before the gift
- The asset is not required for future business purposes
- The asset qualifies for agricultural relief
Specialist Will solicitors can advise on what business assets are likely to qualify for business relief as one means to reduce your estate’s liability to pay inheritance tax. With expert advice, you can maximise the value of your estate and business that you can leave in your Will to your loved ones. Advice on business relief should be considered together with the use of trusts in Wills as part of your strategic tax planning.
Speak to our Bournemouth-based Will Lawyers today
Solomons Solicitors can help with the preparation of your Will and offer a specialist estate planning service. For a free initial consultation, call us today on 01202 802 807 or use our online enquiry form.