Business owners urged to put succession plans in place

Business owners have been advised to have a succession plan in place as inheritance tax changes spark rising enquiries.

Owners attending Travlaw’s annual Big Tent event were told to consider their future role and ensure management was in place post-sale to ensure a smooth transition.

Zoe Powell, director of travel, hospitality and leisure at accountancy firm Xeinadin, said: “Do you want to stay in the business part-time, or are you fully exiting?”

She reported an increase in succession planning enquiries from family businesses due to imminent inheritance tax changes, but also more generally from owners planning to retire. “We’re getting a lot more [owners] in their 60s and 70s looking at what’s next for their business,” she added.

Inheritance tax changes from April 6 will see full business property relief capped at £2.5 million per individual, with any business value above that only qualifying for 50% relief. Powell stressed that all industries were affected despite the media’s focus on family farms.

“It affects all businesses, including travel,” she said, adding: “Our tax experts have been seeing more enquiries about how to change control or pass to family members in a secure way.”

Simon Atkinson, head of travel at Barclays Corporate Banking, said owners making succession plans should consider the importance of their role in the company and whether they have management in place for after their exit, as well as the company’s financial status.

“What is it you’re looking for [financially] that enables you to stop earning? Then work out whether your business is in a financial state that can get you that number,” he said.

Speaking from the audience, Deborah Potts, director of Summit Advisory, said interest from buyers rose if a strong management team was in place after the sale. This often meant recruiting a successor prior to selling, she said, adding: “It shows you’re serious about selling.”

Travlaw partner Ami Naru stressed the importance of the workforce demographic in succession planning. “Is the business diverse enough, or is it top heavy in terms of age?” she said.

“Work out what your business plan is, what your long-term projects are, and make sure you’re going to have staff who can facilitate that at both ends.”