The majority of owner manager manufacturers we speak to have got the commercial strings of their business comprehensively tied up. However, as secure as their grip on the rudder of their business is, if personal matters intervene no amount of commercial planning can prevent significant disruption to the business and its organisation.
Death is a subject which most of us would rather not contemplate. However, for the owners of manufacturing businesses, it will not only have a major impact on their families and loved ones, but can also pose a real threat to the future of the business. With considered and prudent planning, owners can protect the continuity of the business and its management in addition to providing their loved ones with financial security should the unexpected happen.
In developing a succession plan for the business it will also be important to consider the potential tax implications arising on an owner's death and devise strategies that allow business assets to be passed on tax efficiently with minimum deterioration to the business and the owner's estate. Inheritance Tax Business Property Relief (BPR) at the rate of 100% is given to owners of most businesses for the value of their direct interest in the business whether that is as a sole trader, as a member of a partnership or shares in an unquoted company. As BPR can operate as a complete exemption from Inheritance Tax it is extremely valuable. However, in the absence of careful planning, BPR may be lost with the result that the owner's estate is subject to an unnecessary charge to Inheritance Tax.
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The contents of this article are intended as guidelines for clients and other readers. It is not a substitute for considered advice on specific issues. Consequently, we cannot accept any responsibility for this information or for any errors or omissions.