3 ways financial planners and solicitors can help clients sell or pass on their business

If you have clients who run businesses, there may come a time when they’re ready to sell or create a succession plan to pass it on to a family member.

This could be driven by a desire to retire, pursue a new opportunity, or begin a gradual ownership transfer for tax or estate planning purposes.

Whatever their motivation, a joined-up team of professionals, including financial planners and solicitors, can play an integral role in helping them navigate this complex transition.

Read on to find out how our sectors can work together to help clients sell or pass on their businesses.

1. Create a cohesive exit strategy

When clients decide to sell their business, it’s important that they have a well-structured exit strategy in place. It should outline how ownership will transition, how their personal financial future will be secured, and how the ongoing success of the business will be supported.

To prepare and execute this effectively, it’s a good idea for clients to work with a coordinated team of professionals, typically including a financial planner, solicitor, and accountant. Together, they can help develop a comprehensive plan that addresses the key points of an exit strategy, including:

• Succession planning – Who will take over the business? Will the successor need a transition period, and what role will the current owner continue to play during that time?
• Tax planning – What taxes will arise from the sale? Are there any reliefs or allowances the client may qualify for to reduce the liability?
• Timing – When the sale takes place can significantly affect tax exposure and could also influence other financial planning considerations, such as retirement.
• Investment considerations – Will the client retain a minority stake? Are existing shareholder agreements up to date and reflective of the new arrangements?

By working together and maintaining open communication, financial planners, solicitors, and other professionals can help ensure that all aspects of the exit are considered holistically rather than separately. This can help facilitate a smoother transition and a more stable path forward for both the client and their business.

2. Limit the tax liability

When selling a business, it’s important for clients to be aware of the potential tax implications, particularly Capital Gains Tax (CGT), as without proper planning, it can significantly reduce the proceeds they walk away with.

There are several strategies available to help minimise this liability, and financial planners can help clients understand what reliefs and allowances they may be eligible for, including:

• Business Asset Disposal Relief (BADR) – Clients who qualify can benefit from a reduced CGT rate of 14% on up to £1 million of lifetime gains. This can make a substantial difference to the final tax bill.
• Annual Exempt Amount – Individuals can currently make up to £3,000 in capital gains each tax year without paying CGT. With the right planning, it may be possible to spread the sale over several tax years to make use of multiple allowances. Additionally, capital losses can be offset against gains to reduce the taxable amount.
• Spousal transfers – Transferring part of the business to a spouse or civil partner before the sale can effectively double the available Annual Exempt Amount, helping reduce the overall CGT exposure.
• Employee Ownership Trusts (EOTs) – Selling a business to an EOT can result in 0% CGT, provided certain conditions are met.

There may also be other tax-efficient opportunities that could be beneficial to the client, depending on their circumstances, such as transferring some of the proceeds of the sale into a trust.

A financial planner can help clients explore these options in the context of their wider financial goals, ensuring they mitigate their liability by making full use of their available allowances.

Solicitors can make sure the legal aspects of the sale and tax strategy are correctly structured. They can draft and review sale agreements to reflect any CGT planning decisions, assist with establishing trusts or transferring assets, and ensure legal compliance throughout the process.

3. Work with families to facilitate inter-family succession plans

If the client’s business is family-owned, there may be additional considerations, particularly when it comes to Inheritance Tax (IHT).

For instance, when they owned the business, they may have been eligible for Business Relief (BR), which can reduce the IHT liability on qualifying business assets by up to 100%. This relief can make a significant difference in how much of the business’s value can be passed on to the next generation.

However, once the business is sold, they will no longer be eligible for BR, which can potentially increase the IHT exposure of the client’s estate.

To help mitigate this, they could consider:

• Gifting business assets before the sale – Transferring shares or business assets to beneficiaries in advance may allow the client to take advantage of gifting allowances.
• Using trusts – Certain trusts can be used to transfer ownership of business assets in a tax-efficient way before or after the sale.

A financial planner can help clients evaluate these options in the context of their broader plans. They can also ensure that any proceeds from the sale are invested tax-efficiently and structured to meet long-term family objectives.

A solicitor can ensure that all legal aspects of the gifting and trust arrangements are properly structured and compliant. They can also help with other legal protections, such as registering a Lasting Power of Attorney (LPA) to ensure the client’s wishes regarding the business and their wider finances are seen through.

Get in touch

To find out more about how our sectors can work together for the mutual benefit of our clients, get in touch.

Email info@fbwealth.co.uk or call us on 0333 1122211.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, trusts, Lasting Powers of Attorney, or will writing.

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