Tax and

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Tax and Succession Planning By Chas
Roy-Chowdhury
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Tax kills businesses.
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Succession Planning

• Scope of the presentation
• General comment on succession planning
• Which types of businesses do plan and why
• Look at general European landscape for tax and
  business asset transfers
• UK tax rules as a case study

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The Succession Plan
Having an actual succession plan pivotal -
otherwise nothing happens - business may die
with owner Non-tax considerations critical -
accountants should provide a one stop shop and
depth of
experience ACCA research study published 2005 -
in-depth interviews with accountants - they had
inside knowledge of business - they could also
advise from a technical perspective
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Succession Planning
ACCA report shows state of mind of proprietor
determines whether business continues. - Is the
business the individual - or a business Where
individual then life style based. Hobby,
extension of self and no succession planned or
likely Where business is a business then
succession planning likely.
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The Succession Planning
The business without a succession plan is one
waiting to fail Many of the intricacies the
process already considered Important to realise
the plan does not just happen requires pro
activity from entrepreneur May mean thinking
the unthinkable and bringing in an outsider to
run the business
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The Succession Planning Tax
Survey of tax regimes in Europe by FEE 5 years
ago Most countries required some tax to be
paid for transfer of business UK was only one
with little or no tax payable on transfers
Rates of tax varies from 0 to over 50 5 years
ago Present position in Europe is somewhat
different Most countries have now adopted UK
style tax law especially for SMEs
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The Succession Plan
Point 3 Point 4 Point 5 Point 6
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Succession Planning
Taking tax examples from the UK No tax for the
following i) A sole trader business or share of
a partnership ii) Any unquoted securities or
such securities together with assets which give
control of a business The UK relief for these
assets are known as Business Property Relief
(BPR)
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Succession Planning
The relief is designed to help and safeguard the
ongoing viability of small businesses and
partnerships No capital gains payable No VAT
No Inheritance Tax this is the main death
tax The 100 relief is available whether the
transfer is to a complete stranger or ones own
children. Some EU states restrict relief to
only children does not help succession
planning.
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Succession Planning
Agricultural Property Relief (APR) Separate yet
similar reliefs available for agricultural
property Includes farm land and buildings
Relief 100 available for transfers to children
or others who totally unrelated Any part of
estate on which APR not available BPR is. Hence
APR/BPR interaction where necessary to produce
100 relief
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Succession Planning
SMEs must have certainty and clarity on tax costs
The overall problem of any tax costs in some
countries is anti-SME anti-Employment anti-Li
sbon Agenda
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The Succession Plan
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