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Wealth and Succession Planning for Business Owners
For business owners and high-net-worth individuals, building wealth is only part of the journey. Protecting that wealth, ensuring it passes efficiently to the next generation, and safeguarding the future of the business are equally important. Without careful planning, years or even decades of hard work can be eroded by unnecessary taxation, poor succession outcomes, or a lack of control once wealth is transferred.
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Wealth and Succession Planning - At a Glance
- Who this is for: Business owners, company directors, and high-net-worth families with retained profits who want to protect wealth, retain control, and plan for succession.
- Key risks covered: Inheritance Tax (IHT), loss of Business Property Relief (BPR), inefficient retained profits, and business disruption from poor succession planning.
- Strategic focus: Separating trading and investment assets to reduce tax, protect reliefs, and create long-term certainty.
- The outcomes: Greater lifetime control, improved tax efficiency, smoother succession, and a clear legacy for the next generation.
- At a glance solution: A Lifetime Business Tax Plan using a Family Investment Company (FIC) and Small Self-Administered Scheme (SSAS) to protect, grow, and pass on wealth efficiently.
The Importance of Forward-Thinking Wealth Planning for Company Directors
Many business owners focus heavily on growing their tradingcompany, often retaining substantial profits within it. Whilst this may seemsensible, it can expose both the business and the family to unintended taxrisks. Excess cash held within a trading company can affect its tax status asit then becomes viewed as an investment company, potentially jeopardisingvaluable reliefs such as Business Property Relief (BPR).
Succession planning is another area where inaction can becostly. Without a clear plan, businesses can face disruption or even failurewhen a founder steps back or passes away. Family disputes, tax liabilities, anda lack of liquidity can all undermine what should have been a smoothtransition.
By separating wealth accumulation from trading activity and placing assets into purpose-built structures, business owners can reduce risk while increasing flexibility and control.
One approach commonly adopted by business owners is the use of a Lifetime Business Tax Plan (LBTP). This is an integrated planning strategy designed to protect wealth during your lifetime, grow it tax-efficiently, and pass it on to future generations with minimal friction. At its core, the LBTP combines two powerful structures. These are:
- The Family Investment Company (FIC)
- The Small Self-Administered Scheme (SSAS)
Together, when structured correctly, these can provide significant tax efficiencies, enhanced asset protection, and a clearer, more controlled path for business succession.
What Is a Lifetime Business Tax Plan?
A Lifetime Business Tax Plan is an integrated planning strategy designed to address the full lifecycle of business wealth. Rather than relying on a single structure, it combines complementary vehicles that work together to achieve multiple objectives:
- Protecting surplus cash and investments
- Maintaining control during your lifetime
- Maximising tax efficiency
- Preserving Inheritance Tax reliefs
- Simplifying succession and legacy planning
The Family Investment Company and the SSAS each play a distinct role, but their combined use is where the strategy becomes particularly powerful. Together, they allow for further control, enhanced tax efficiency, and secure succession planning.
The Family Investment Company (FIC)
A long-term wealth and succession planning structure for business owners and their families.
A Family Investment Company is a private limited company that when structured and managed correctly, can be established to hold investments and assets for the benefit of family members. It is often used as an alternative to traditional trusts, offering similar Inheritance Tax planning advantages but with greater flexibility and transparency.
Control Without Giving Away Ownership
One of the key attractions of a FIC is that the company director – typically the business owner – retains full control over decision-making. Different classes of shares can be created, allowing voting rights and economic rights to be separated. This means you can gift value to family members whilst retaining control over how assets are managed and distributed.
For many business owners, this strikes the ideal balance: wealth can be passed down gradually, without relinquishing control prematurely.
Inheritance Tax Efficiency
Shares in a FIC can be transferred to beneficiaries overtime, often using allowances or growth-focused planning strategies. Because future growth accrues outside the individual’s estate, this can significantly reduce exposure to Inheritance Tax (IHT).
Unlike many trusts, a FIC does not trigger immediate or periodic Inheritance Tax charges, making it particularly attractive for long-term family planning.
Protecting Business Property Relief
A common but often overlooked issue is that holding significant surplus cash or investments within a trading company can cause HMRC to view it as an investment company. This can put Business Property Relief(BPR) at risk, potentially exposing the business to a 40% Inheritance Tax charge.
By moving retained profits into a Family Investment Company, surplus cash is removed from the trading entity. This helps protect the trading company’s BPR status whilst ensuring that wealth is still retained within a controlled corporate structure.
Tax-Efficient Investment Growth
The FIC can invest in a wide range of asset classes, including property, equities, and other investments, all within HMRC rules. Importantly, profits generated within the company are subject to Corporation Tax, which is often significantly lower than personal Income Tax or Capital Gains Tax rates.
This differential alone can result insubstantial long-term tax savings, ensuring that more wealth is retained for family members rather than lost to taxation.The Small Self-Administered Scheme (SSAS): Pension Control for Business Owners
A Small Self-Administered Scheme (SSAS) is a corporate pension scheme designed primarily for business owners. Unlike traditional pensions, a SSAS offers a high degree of flexibility and control.
Membership and Control
A SSAS can have up to 11 members, who may include businessowners, family members, or key employees. All members automatically become trustees, meaning decisions are made collectively, with full transparency and control over investments.
This structure allows families to involve the next generation in wealth management, helping to educate and prepare them for future responsibility.
Broader Investment Options
While a SSAS offers all the benefits of a traditional pension, it also allows access to a wider range of investment opportunities. These can include commercial property and other non-standard assets, subject to pension rules.
This flexibility enables business owners to align pension investments with their broader financial and business strategies.
Legacy Benefits
By naming beneficiaries in advance, business owners can ensure that wealth passes quickly and efficiently to the intended recipients.
LBTP Beginners
Tax Planning Essentials
How the FIC and SSAS Work Together
The true strength of a Lifetime Business Tax Plan lies in how the Family Investment Company and SSAS complement each other.
Surplus cash remains under the full control of the company director and is transferred into the Family Investment Company, which is also controlled by the director. This ensures liquidity is preserved and can be accessed if required. Should the trading company need a cash injection, funds can be returned from the FIC at any time.
If the director chooses to invest surplus cash, returns generated within the FIC can be paid into the SSAS without incurring a tax penalty. This creates a highly efficient pathway for moving wealth into a pension environment, where it can continue to grow free from income and capital gains tax.
Both structures remain under the control of the businessowner during their lifetime, with clear succession and beneficiary planning in place should the worst happen.
Simplifying Business Succession
One of the most challenging aspects of succession planningis balancing fairness, control, and tax efficiency. The combined use of a FICand SSAS can significantly simplify this process.
- The trading business is kept lean and focused, protecting BPR
- Investment assets are held separately in a tax-efficient structure
- Family members can be introduced gradually as shareholders or trustees
- Clear beneficiary nominations reduce uncertainty and disputes
This clarity can be invaluable during times of transition, ensuring continuity for the business and security for the family.
Building a Lasting Legacy
Ultimately, wealth and succession planning is about more than numbers. It is about protecting your family, preserving your business, and creating a legacy that reflects your values.
By using a carefully and appropriately structured Lifetime Business Tax Plan incorporating a Family Investment Company and a Small Self-Administered Scheme (SSAS), business owners can take proactive control of their financial future. The result is a strategy that protects wealth, reduces unnecessary tax, and makes succession simpler and more certain.
With the right advice and planning, your hard work does not have to go to waste – it can benefit generations to come.
Book a call with an expert to discuss wealth protection and succession planning for your specific circumstances today – do not wait until it is too late.
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