Sell Family Company - want to give some proceeds to children by trust

[dmplondon]

Clients own 'family' trading company. Seems best thing is now to sell for 'significant' amount of money. Normally the shares would have been passed down at some point in the future.

Owner wants to pass on some of the proceeds to their adult children but does not think they should have the capital now.

Pre Mar-06 would have suggested a simple IIP trust to put some of the proceeds. PET on entry. Income taxed at beneficiaries rate. Flexible time scale to pass on assets.

However, this is going to be chargeable for IHT purposes (any utilisation of NRB will not be significant here).

What options do we have now?

Could some of the shares in the company be given to trustees before sale? Putting in to trust would get 100% BPR. The trust would then sell the shares and the proceeds would be on trust for the children without an IHT charge.

Obviously a 10 year charge (but client thinks children will be ready for the cash within that time). Would there be an exit charge if cash given before 10 years (thus removing the benefit of BPR?)

Would this work anyway if there were agreed terms of sale or heads of agreement on the company shares?

Any other thoughts?

Many thanks,

[Taxesclear.co.uk]

Yes there will be an exit charge before the 10 years this will regarded as a proportional exit charge.

Have you considered using multiple trusts for this purpose so each trust will have its own nil rate band and therefore remain inside the IHT limit. So no exit charge.

Multiple trusts set up on different days are not aggregated.

There are some steps you need to make to ensure equal values are transferred into each trust

Dennis@taxesclear.co.uk