When you think about estate planning and planning for the worst, you usually think about protecting property and bank accounts. But if you own a business, there’s far more to consider.
What happens to your business if you are incapable of making decisions or if you die? Is inheritance tax charged at 40% on the value of your business? Is there any way that you, as a business owner, can protect your business from inheritance tax and safeguard as much as possible for your loved ones?
Business property relief
Some business owners are not aware that there is a specific inheritance tax relief for businesses – BPR.
If you own shares in an unquoted business, you can get 100% relief on the value as long as you have owned the shares for at least two years before you passed away. You can also get 50% business relief on land, buildings or machinery owned and used in the business.
BPR is also relevant if you are considering selling or transferring your business during your lifetime, as inheritance tax is charged on the transfer if it happened within the seven years prior to death.
Inheritance tax planning
We offer specialist advice surrounding the steps you can take to ensure as much of your estate, including your business, is protected from inheritance tax as possible.
We can advise you on the best way to incorporate this planning into your Will, by evaluating what parts of your business qualify for BPR. The correct planning will help you pass as much as possible completely free of inheritance tax, and will avoid the need to sell the business to cover any inheritance tax liability.
Business lasting powers of attorney
If you own a business we would recommend putting business LPAs into place to make sure whatever happens, your business will always be running.
The LPAs are effective during lifetime and help when you can’t physically or mentally make decisions for your business. It doesn't’t revoke your authority in the business, and certainly doesn't’t hand over complete control to another person; it simply ensures that if the worst happens, a person that you have nominated will be able to make decisions and keep everything running smoothly.
If you have a business and want to discuss how we can help you protect it, book an advice appointment with one of our specialists today by calling 01616 966 229.
By Ayesha Khan, graduate paralegal in the Wills and probate team.