Taking businesses forward – have you mapped out the future of your business?

John McCaffery
X The Business Desk

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In a recent webinar, ‘A new mindset for a new tax year’, the panel discussed how businesses evaluated their position throughout 2020 and took heed of what is important to them.

For many businesses this has led to them taking decisive action as they move forward.

Here, panellist John McCaffery, tax partner at Alexander & Co, gives his insight on how many businesses have refocused on succession planning and why it will provide an important consideration for many as they make plans to move forward more resiliently.

In hindsight everything is much clearer

In March 2020, it is fair to say that no business owner could have anticipated what lay ahead of them.

Whilst some sectors clearly suffered more than others, very few were unscathed. If any could be described as winners (or perhaps the stronger survivors), it was those businesses that quickly took stock of their own situations and were able to adapt. Nevertheless, it was a wake-up call for many business owners.

Being able to adapt and indeed the need to become more resilient meant for many insuring they had plans in place for succession, whether this was through losing key staff, or business owners themselves considering how they want to take their firm forward, perhaps also considering a sale or merger of their firm, or indeed a company purchase.

Succession planning affects all businesses, and owners and senior managers should ask themselves a series of questions – are formal arrangements in place to govern this?

As a business owner, do you have an exit strategy in place for when you want to step down or leave the business? Is the business as robust as it can be to attract a sale or investment, and can this be executed in the most tax effective way?

Shareholders’ agreements and shareholder protection

A well-executed shareholders agreement can protect a business if a shareholder or director leaves the business, either through their own wishes, mutual agreement, or through ill health.

Shareholder protection, in conjunction with shareholder agreements, can help protect against such untimely events, the later effectively providing an insurance policy to ‘buy out’ the departing person.

A business trust can also be useful for shareholders protection. The inheritance tax position should be considered and assistance should be sought to structure these in the most tax-efficient way possible, based on personal circumstances.

Sales, mergers and acquisitions

The last 12 months has led many to consider disposing of their business, whilst others looked to merge or even took on acquisitions as they planned for future growth.

Those who had their house in order were able to be proactive, while others had to work quickly to make sure all the fundamentals were put into place. This included accounts, cash flow and business plans.

Making sure that you are always on top of the basics helps the business to remain resilient and on course.

It also allows swift action when opportunities arise.

The Family Businesses dimension

Succession planning for family businesses is even more crucial, as an extra layer of complexity exists with succession. Here it is even more important to ensure that succession planning is considered early as the fortunes of the business and the family are inextricably linked.

Consider the impact if the business is handed down to a family member with no interest in the firm, or what the implications would be if a family member, with no knowledge of the business was to take the place of a key shareholder who passed away unexpectedly.

business planning

Bringing your business back, profitably

Many businesses may still have some of their staff on furlough and with government support being phased out over the next six months, decisions will need to be made on how to bring staff back.

For many firms, roles will have changed, with some businesses taking a different direction.

Staff skills are important, will you be able to replace key staff as businesses bounce back, will retaining them now help in the long term? These are questions that should be looked at in tandem with wider business plans, taking a holistic approach as to how the business will operate going forward.

The last 12 months has, for many business owners, allowed them to refocus on not only what they want out of their business, but their wider aspirations and what else is important to them.

Keeping this in mind and making sure the succession of any business is always at the forefront of a business’s ethos, will keep them better prepared and resilient for the future.

Tax efficient succession planning

Succession planning will always have tax implications, sometimes complex. It is never too early to consider this – the sooner, the better. Advanced planning provides more options and greater flexibility.

Business owners who leave it late to consider succession planning find that it becomes more difficult to carry out their wishes in the most tax-efficient manner. Early planning and regular business reviews will help to ensure that a business is on track and focused on what matters to its owners.

The specifics will vary based on individual circumstances, but this may include:

  • Advanced planning for a sale and ensuring that the business is structured to maximise the availability of Business Asset Disposal Relief, with gains of up to £1m per shareholder being taxed at just 10%.
  • Putting a plan in place for the company to buy back shares from a retiring/exiting shareholder, and planning for the proceeds to be received tax efficiently and treated as capital in the hands of the shareholder as opposed to an income distribution.
  • Reviewing the activities of a company or group to ensure that the structure maximises the availability of Business Property Relief and/or Agricultural Property Relief for Inheritance Tax purposes.
  • A long-term plan to gift shares to the next generation in a family business over the next 20 or so years, maximising Nil Rate Bands and Potentially Exempt Transfers for Inheritance Tax.


With the knowledge gained by businesses over the 12 months, working to ensure resilience through forward planning has never been so important as we continue to move ahead.