Hi All,
My parents run a small retail business as a husband and wife partnership however would like to pass this on to my two siblings and I as they retire.
They own shop properties which are included in the business and would remain used by the business however in case of the sale of properties they would retain the proceeds (we're not planning on selling them).
We had thought that my parents would gift 20% of the partnership to my siblings and I with my parents retaining 20% each. Profits would be split using a different ratio according to involvement in running of the business. We all plan to work full time in the business initially but this may change to some being involved on a part time basis. In the hypothetical eventuality that we sold the business, my parents aren't interested in the capital other than that relating to the properties. The properties are the main value on the balance sheet but there would be some goodwill on sale. We wanted to be able to vary the profit sharing ratio each year but keep the capital ratio static.
An accountant advised that my parents are better leaving the business capital as it is now, draw a line under it and start new current accounts where profits can be split going forward. There would be no need for gift elections as they hadn't given us any capital and then eventually upon death the business would qualify for business property relief from inheritance tax.
Is the accountants advise the most tax efficient way to go about the handover? Would it cause any tax issues for my family?
Thanks in advance for any advice.
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