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Don’t know what you don’t know? Don’t worry – we will ask the questions that may not even be on your agenda yet.
These are just some of the questions we look at when advising you on the right structure for your business. We may also ask whether you already have an exit plan in mind so we can make sure the path we choose right from the outset is as tax efficient and exit ready as possible.
Getting the right structure at the outset can be much easier than trying to change it later down the line.
The early days of a business venture can be time intensive and cash poor. Additional finance, whether this is family, self-funding investment or external investors, can give a much-needed boost. Some businesses use short term debt funding, but many find this can be an expensive option at this stage, so instead look for external ‘business angel’ style investment.
Special tax advantaged investment schemes such as Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS) both offer investors compelling tax reliefs on their investments which can offset against the risk of the investment itself. We can help you apply to HMRC for qualifying EIS or SEIS status so your investors have more certainty over the relief available.
Will your business qualify for Investor’s Relief? If you have UK resident investors who also have funds ‘trapped’ offshore, then Business Investment Relief might also be worth considering. Understanding how these might apply to your funders can be helpful in promoting your business for investment.
Once a business has survived the first few years, the options for additional funding can start to look very different. A healthy balance sheet might make debt investment more appealing, but equity investment still appears to be the preferred option at this stage. Tax-advanced schemes mentioned above, such as EIS and SEIS, are available within the first seven years of trading so might still be a possibility.
VCT style investment may also be an option. Having an advisor who is a step away from the deal and not on commission can help bring clarity to what this means for the founders. Advising from both a business and tax perspective, we can help ensure all bases are covered with questions such as:
With cash flow stretched, attracting and retaining the right staff to support your growth plans can be tricky. This is where employee share schemes can make a real difference.
From approved share schemes such as Enterprise Management Incentive (EMI) to unapproved growth plans, we can discuss the differences and work with a legal team to fully implement. Need to make sure you are meeting any employment related security compliance requirements? That can be wrapped into our services too.
“We have worked with Dale and the Team at FCF for over 15+ years, they handle all of our tax work as well as expertly guiding us through several acquisitions that we have made in recent years. They provide us with first class advice in relation to our annual accounts and tax returns and have always exceeded our expectations in this respect.
Their knowledgeable business advice has enabled us to grow our business solidly with complicated situations becoming far less complex with them onboard. Everyone that we deal with in FCF is responsive, proactive and supportive, we genuinely value the relationship that we have built up and as such I have no hesitation in recommending their services.”Simon Coghlan - Graypen Group
You might find yourself diversifying or refining, which means you need to either acquire other companies or demerge parts of your own. Maybe there are elements of your business which just aren’t as successful as you had hoped, and you want to sell that side on to concentrate on your core business. We can help with structures and help you understand the most tax efficient structure to achieve this.
After the heady growth years, to prevent stagnation, the company may be looking at ways to reinvent its offering.
Maybe there is a section of your business which isn’t performing as you would like, and you want to concentrate on your core business. Or you may have a successful business which relies on certain input or manufacturing and now want to naturally expand into that sector. We can be a part of those discussions and help you understand the most tax efficient structure to achieve this.
In addition to organic growth, at this stage you may also be considering acquisition of either a competitor or supplier. We can support the purchase through our due diligence processes and buy-side advisory services.
A tactical plan for the future can help you navigate this phase. If you know the best chance of success for your business is a secure management team, share incentive schemes such as Enterprise Management Incentive can help incentivise staff so you are all on the same path.
What is your company worth? We can provide a professional summary or in-depth valuation so you can understand what you could expect.
Our advisory team can help provide corporate finance support, which might range from a due diligence check to a full pre-exit strategy review.
If you are not passing on the business to family or through an MBO, you might need to look at a sale. Will that be of the company or of its trade and assets? Following an MBO, will the company purchase the retiring shareholders shares and what will this look like from an accounting and tax perspective?
Could an Employee Ownership Trust be the right exit to route for you (EOT relief)? Do you have family members who want to take over the business (gift relief for CGT)? A restructure involving family members can result in Inheritance Tax issues. Following exit, owners might find that without Business Relief (BR) or Agricultural Relief (AR) their potential liability to IHT increases significantly.
Entrepreneurs’ Relief can reduce your capital gains tax rate on exit to 10%.
Incentivising the next generation is likely to be a long-term plan. How you pass on equity to them can be a big decision, especially where adult children with spouses and dependents are concerned. Not all of the children may be involved in the business, and thinking about how to balance inheritance of the business across the family can be anxiety inducing. We can advise on potential structures involving Trusts or discuss your will with your solicitor to make sure that the steps taken are in line with your intentions and without any tax surprises.
You might also recognise that there is a difference in skill sets and therefore other considerations, such as bringing in key management team to support them, may be required. Having the continuity of advice onto the next generation and nurturing that relationship is key to the longevity of our engagements.
If family succession is not on the cards, then we are looking at an exit for the current shareholders.
An exit can take on many guises and range from a partial exit to full exit. We have supported on exits with a range of sell side advisory for a number of clients.
What is your company worth? Assuming our services are not audit restricted, we can provide a professional summary or in-depth valuation, so you can understand what you might expect. Our advisory team can help provide corporate finance support which might range from a due diligence check to a full pre-exit strategy review.
A good pre-exit tax strategy should be discussed well before an exit event. A number of anti-avoidance provisions can prevent tax options being available where the exit is already in advanced stages.
An external sale is where a third-party investor or company buys either the trade/assets or the company shares. How simple or complex this is can depend on a number of variables. Often these will be partial exits with equity rolling into a new structure or full exits with tie ins, such as deferred consideration or earn outs. We can advise the sellers on the personal impacts, such as the different tax considerations of loan notes, or when you will pay tax on deferred consideration.
From an internal perspective, we have been involved in Management Buy Out (MBO) advisory for many clients. This can often start many years prior to the MBO with an EMI implementation, so the key management are being developed to take over the business.
If the management tier is not strong enough, could an Employee Ownership Trust be the right exit route for you? This is a specific tax advantaged employee share ownership plan where the employees take over a majority stake in the company through a EOT, with significant tax benefits for the seller. We can provide the advice and structure for the sellers to ensure the relief is available.