Reduce the inheritance tax bill on your firm

MANY family business owners plan on passing on their company to the next generation.

This desire for business longevity is recognised by inheritance tax legislation which provides generous tax breaks for business owners which can potentially reduce the taxable value of a business to nil.

Here are three of our top tips to maximise your business relief (BR) entitlement : 1) You may own the premises from which your company operates in your name rather than in the company’s name.

If this is the case you will only be entitled to BR at 50 per cent, rather than the 100 per cent relief that could apply if the premises were transferred to your company and reflected in the value of your shares. 2) To qualify for BR your business must be a trading company.

If it is classed by HMRC as being wholly or mainly an investment company no BR will be available. Investment activities can, for example, include the company assets consisting of property which is let out without any additional services being provided.

This is a trap that can be fallen into gradually as circumstances change and you should review the situation regularly, as re-structuring might be necessary to ensure BR is maintained. 3) If you and your spouse or partner both own shares in the company, leaving those shares to your spouse in your will will waste BR as gifts to a spouse or civil partner are exempt from IHT.

Good will planning is essential and can result in your family benefitting from a double dose of BR, or, if the business is sold, putting some of its proceeds outside of your estates in an IHT efficient trust. Karen Martin Moya is Marketing & Business Development Executive Clarke Willmott