UK Business Owners Unprepared for Exit

Stephen Harris

8 June 2005

New research by Coutts and Business XL magazine shows that over half of the owners of growing mid-sized UK businesses are facing difficulties in devising effective exit strategies and that many have no future wealth plans in place. The research, sponsored by the Royal Bank of Scotland and law firm Nabarro Nathanson, was conducted among 148 UK companies with a turnover exceeding £10 million ($18.3 million). Retirement was the most popular factor influencing the decision to sell a business, with 36 per cent of respondents citing this as being the time they would want to sell. However, planning both pre- and post-exit strategies with regards to wealth, is as important as the preparation for the sale. Harry Lewis from Coutts Cardiff said, "It is surprising to see that such a high number of business owners do not plan a wealth management strategy, particularly as for any exit strategy to bear fruit in the long term, attention must be paid to the Inland Revenue. "When selling a business, minimising tax liabilities should be a strong concern, particularly in relation to capital gains tax. Although the ownership period required to obtain CGT business asset taper relief has now been reduced from four to two years, reducing the effective rate of tax for higher rate taxpayers from 40 to 10 per cent, particular planning must be undertaken with businesses who plan to sell within this two-year period. "Another area that is frequently overlooked in these circumstances is the extent to which a portion of the increase in capital value of a company may be subject to income tax in the hands of the owner managers."