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Directors & Partnerships

Overview 

Tax Planning and Protection should be part of the strategic plans for any good business

Tax Planning

This is too complex a subject to cover here; suffice to say that Sovereign Asset Management can offer a range of solutions

Protecting the business

Business protection basically falls into two main categories; both are designed to meet the needs of business owners  

Share purchase

In the event of a death of a shareholder (this can equally apply to partners), it is not unusual for the remaining shareholder(s) to want to retain complete control of a successful business by purchasing the shares that a deceased shareholder had owned. Typically, upon death the shares will pass to a surviving spouse, or perhaps another family member (referred to as the "new owner”). Depending on the percentage shareholding (and class of shares) the new owner may now be in position of control, or have a say in the way the business is run. Realistically the new owner would probably want to receive cash instead of inheriting shares (of course there will be exceptions to this rule). Typically the surviving shareholder(s) will need money available and more importantly a written agreement to enable them to purchase the shares; the agreement will set out the terms to buy & sell the shares. If cash is not made available to buy the shares they will probably be of little practical value to the new owner and are likely to be difficult to sell to an outsider, especially if they are a minority holding.  Without advance planning a business could be thrown into difficulty and find that all the hard work to build a successful business is eroded by legal and financial complications. The family of a deceased shareholder may feel entitled to a reasonable degree of financial compensation so having an agreement and the money in place will minimise a range of potential ‘problems’. In the vast majority of cases the sensible and affordable solution to the above is to arrange some from of assurance cover, to provide the necessary funds for the right people at the right time.  As well as planning for death, cover for critical illness should be considered; please go to the Protection page for more information about critical illness. 

Key person
The success of a business is determined primarily by the knowledge and expertise of individual people that make up the business.  Without the input of certain ‘key’ individuals a business may become exposed to financial difficulties. Key person assurance cannot replace people but it will provide the financial support needed to help a business through a potentially difficult financial period. Importantly the policy proceeds, can be used to repay any loans or other debts (which often have to be repaid following the death of a key person).

Employee (group) benefits 

Rewarding, recruiting and retaining personnel in today’s ‘mobile’ job-market, requires more than just the payment of a salary.  A range of employee benefits are available, such as group pension plans and group protection plans.  Normally benefits are provided by a group scheme; this can specifically cover a select category of staff, such as executives. Different levels of benefits can be arranged for different categories of employees.  As long as employee benefits are not exclusively for the Business owners, it is normally possible to obtain corporation tax relief against the premium, for most employee benefits.

Salary Exchange – it could be suitable 

If you would like to read about an idea that could reduce your National Insurance liability, go to Tax Planning and read about a Salary Exchange arrangement, under the heading National Insurance