Planning ahead is vital to reduce liability
Navigating the tax maze is complicated
Seek professional advice from specialists throughout the process
Many garden centres are successful family-run businesses but when passing the business down from one generation to the next, it is vital to plan for Inheritance Tax (IHT). Planning can significantly reduce IHT and avoid leaving complex issues for families to resolve. Navigating the tax maze can be complicated. Seeking professional advice from specialists throughout the process is important.
As a starting point, owners should know what their business is worth. To ensure an accurate market valuation, it is essential to approach a valuer who understands garden centres, how they operate and who has a detailed knowledge of the market. We can supply that specialist valuation advice.
Garden centres are categorised as business assets and attract Business Property Relief at a rate of 50% on death but only if certain conditions apply. However, if the garden centre is held via an unquoted limited trading company and shares have been held for two years then 100% Business Property Relief will be due, ie there will be no IHT payable on the business.
It is important to note that IHT relief will be due if assets are gifted before death, if the donor has held the assets for two years before gifting. Relief will only be due if the beneficiary is holding the assets as a going concern at the donor’s death. Any assets or shares gifted more than seven years prior to death will be completely exempt from IHT.
For individuals who receive gifted shares, there are two types of tax relief that might be available, Business Property Relief and Entrepreneurs Relief, but only if certain conditions are met.
A bigger issue is around succession planning. When considering succession issues, it is not just about gifting your business. You will need to ensure you retain some right to income or capital to fund your retirement. Planning ahead is critical, and succession planning is covered in more detail in Advice Note 22.