BPR/APR reforms: Entrepreneurs guide

For example, are you seeking to extract value via an exit, or do you see the business as something to be nurtured by future generations of your family?

Do your co-founders share your vision, or will the approach need to take into account their different objectives?

Review how the business is owned. If it is structured as a company, how are the shares divided? Are any key assets, such as land or IP, owned personally by individuals outside the structure?

Ensure that it is clear how assets like company shares would pass on and who would have the ability to run the business. Company articles, shareholder agreements, partnership agreements and Wills all have a role to play. You should remind yourself of the terms of each of these and ensure they allow you to deal with your interest as you wish.

Consider for each interest owned what the value of that interest is. For spouses, the related property rules (see our discussion of this in our post in relation to related property rules) will mean that joint ownership will not produce a discount for minority holdings, whereas ownership split between other individuals may mean that there is a discount. Valuation advice should be taken on this point.

Using values (either estimated or formal) now model what any IHT would be on the death of co-founders. Is this affordable?

For example, can a co-founder’s life be insured? A step as simple as making a Will, leaving their shares inheritance tax free to a spouse, could be a good first step to addressing the risk. But consider whether a more sophisticated alternative is needed if the spouse is not involved in the business and so the IHT reliefs are maximised.

Entrepreneurs thinking about extracting value via an exit may wish to place some of their shares into a trust for children now, before the cap on IHT relief limits the value they can place in trust in this way, with no IHT. If an exit from the business is expected within ten years, then the impact of the IHT changes from April 2026 may be irrelevant for future IHT charges within a trust (but there would still be an IHT advantage in putting assets into a trust prior to April 2026).

Alongside any structuring, each individual should consider their own estate planning.

Co-founders should have Wills and letters of wishes setting out how their shares in the business pass on, how they would expect their family to be provided for and who, if anyone, should continue to run the business.

All Wills should be structured so as to maximise the remaining 100% allowance for relief, as well as deal with any property that under the new rules will only get 50% relief.

Lasting powers of attorney are vital tools to manage the risk of a long-term loss of mental capacity (for example, a coma). It is possible to put in place LPAs which are specifically limited to the operation of the business and allow co-founders to keep operating in the meantime.

Individuals should also consider asset protection, such as pre- and post-nuptial agreements (marital agreements) or cohabitation agreements. Ideally these should be put in place before any substantive gifts are made. Provided the needs of the other party are properly met, these agreements can offer powerful protection against division of the family assets on a divorce, ringfencing them as non-marital assets