Wylie & Bisset advises business owners to take account of the tax implications of succession

Chartered Accountants Wylie & Bisset is advising family business owners that a key element to a successful succession strategy is to take account of the tax implications in doing so.

With a recent survey suggesting 80% of family owned business owners believe it is important to involve family members in the business with 78% saying they would want family members to gain the professional qualifications to enter executive roles, it would appear that family succession is still the preferred route in moving businesses on.

If that is the case, businesses should encourage the next generation to work their way up from the bottom to the top of the business as the best way to get to know it inside out and take account of the tax implications along the way.

Catherine McManus, head of tax at Wylie & Bisset, said: “Whatever, the route to succession, there will be tax implications to consider, whether that be the impact of the transfer of ownership to the family via gift or by receipt of value via onward sale. That’s where we can help.

“We have advised several business owners of the most tax advantageous route of succession both inside and outside the family unit. We have also provided the associated corporate finance support alongside this. We urge family business owners thinking of succession to come and speak to us.”

McManus says that, tax aside, for business owners intent on succession within the family unit the best opportunity for success is to ensure the next generation of family members know how the business operates thoroughly.

“Often family members join a business concern when their direct relatives are already at the highest level in the business making executive decisions and overseeing management,” she said.

“It is important for family members to recognise the experience gained in getting to that stage.

“I would advise existing family business owners to encourage the next generation of family members to gain all level experience within the business alongside obtaining skills away from the family operations if possible.”

McManus advises family business owners to encourage the next generation to secure professional qualifications and to look for non-family mentors and non-family contemporaries.

“It is motivating to have people not so intrinsically involved in the family dynamic to mentor the next generation of family business owners. This will also provide some competitive spirit in the workplace,” she said.

“Outside the family succession can come in different guises and need not be family led. Owners can look internally for management buyout alternatives or begin the process of preparing themselves for market for a third-party buyer. This still enables wealth to potentially stem out to family but allows the business they helped create to flourish under new ownership.”