Transferring a business to a family member

Tax implications of family succession

Guide

Think carefully about the tax implications of family succession.

Entrepreneurs' relief

Entrepreneurs can claim relief on gains made on the disposal of all or part of a business, or a disposal of a business' asset after a business has ceased. The relief gives an effective rate of 10 per cent on all gains on qualifying assets.

Read more about entrepreneurs' relief.

Inheritance tax reliefs

You may qualify for business-property relief from inheritance tax if you sell or pass to relatives:

  • your business
  • an interest in your business - your share of a partnership, for example
  • shares in your limited company

This should allow you to make such transfers free of inheritance tax for at least two years, even if you don't live for seven years from the transfer date.

Find out more about inheritance tax reliefs.

Capital Gains Tax

If you dispose of your business to a relative, other than your spouse or civil partner, you may have to pay Capital Gains Tax on any gains made on these 'assets'. Note that the open market value of the assets of the business may be used in calculating the taxable gains if the disposal of an asset is for less than this value, or for something that cannot be valued.

You may be able to defer (hold over) Capital Gains Tax, meaning your successor will pay it if and when the gain is released in the future.

Read more about Capital Gains Tax.

When examining your options, always seek expert advice from your accountant and solicitor.