What is succession planning?
Succession planning is the process of identifying and developing the individuals who are to take over the business and ensuring the structures are in place to allow for this, including planning for any tax charges.
How long does it take?
This depends on the nature and size of your operation. For larger, more complex estates, a succession plan could take many years but with the right advice and expertise, it could take considerably less time. The plan involves major ongoing decisions, how the business is owned, the role of each family member, and other factors. It is important to remember that succession planning doesn’t have to start when you’re nearing retirement. Start planning sooner rather than later.
Communication is essential
As difficult as it can be, families should communicate openly and honestly about their wants, needs and expectations for the business; this will allow you to develop a plan that doesn’t just fit one person’s interest, but everyone’s. As difficult as it can be, try and avoid emotions, you must think about the business and constantly think; ‘what is best for the sustainability of our business.’ Farming in particular faces many challenges in terms of passing on a business which people are understandably, often reluctant to face. However, it is no coincidence that a huge proportion of contentious probates involve farms.
Plan for the unexpected
Nobody likes change but when you’re creating a succession plan you need to remember there may well be unforeseen deaths, marriages and divorces. To make sure your business ends up in the right hands, the business agreements should be carefully documented, this could include company articles, shareholder agreements or a partnership agreement.
It is important to consider diversification. Trends are continuously changing and it is essential to consider alternative options which could result in success for your business in the future. This could be letting out properties on the farmland, using land for sustainable energy, opening up a farm shop or other alternative options. Allowing time to plan early and thinking open-mindedly could provide value to your business in the future.
- Inheritance tax application and relief
- Capital gains tax; application and reliefs
- Timing of tax payments; planning for
- Trust taxation ; the note of trusts and how they are taxed
- Stamp duty land tax
You may wish to seek legal advice at the very start of your succession planning. By involving a specialist early on, they can get a full picture of your business objectives to ensure you have the right agreement in place to protect your family’s business future.
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