Tax planning for the family company

With the cost of living increasing, remuneration planning is important to review the income taken from the family business and the most tax efficient way to do this.

Have you considered introducing your family members as shareholders?

It is a useful planning tool but of course, there are tax implications to consider.
Why include family members and what are the benefits of including family members as shareholders?

• Succession: Current shareholders may be considering stepping back, and if children are increasingly engaged in the business, it may be appropriate to acknowledge or reward their participation.
• Remuneration planning: Directors and shareholders allows flexibility in terms of compensations such as salaries, pensions, and dividends which assists with tax planning.
• IHT planning: Limiting the value within the current owners’ estate might be appealing and involving the next generation can help transfer value to them.

Indeed, there are other potential reasons to be considered before deciding whether to include family members as shareholders and the protection of the asset is important.
In certain scenarios, having family members as direct shareholders may not be suitable, especially if children are under 18.
Introducing a trust as a shareholder could be a strategic decision for business owners, either in addition to or instead of direct family ownership to provide protection and control aspects. A trust can aid in effective succession planning, offer flexibility in benefit distribution, and present potential tax benefits. It can also enable the inclusion of children while allowing owners to maintain control.

Nonetheless, setting up and overseeing a trust entails detailed legal and tax aspects, requiring expert advice to navigate the intricacies.

We offer a free one-hour consultation.
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