The Secrets of Succession

Part One – Introduction

Published research has repeatedly shown that only a very small minority of family businesses survive intact for more than two generations of ownership. But there is, equally, clear evidence that this is not an inevitable outcome and that (not surprisingly) effective planning is the key to success. For example, findings published by Investec in December 2023 indicate that over 80% of businesses which do have a robust succession plan in place expect to pass the business to the next generation and are confident the skills and expertise are in place to make a success of that process. But research undertaken in late 2024 indicates that almost 70% of businesses have no succession plan at all, and almost 50% of families have never discussed the topic of succession.

For us at Kirk Newsholme, helping our clients to manage a positive outcome in respect of their business succession challenges is one of the most satisfying ways for us to give real help to our clients, and often for our clients represents one of the most important ways we can help add value to them.

The challenges to devising and implementing a successful strategy come from numerous directions. The tax system may present a barrier to achieving succession plans and with current changes to inheritance tax and the reduction of tax relief for business assets, with further changes speculated, this is very much a live issue.

In some cases generational succession may be limited because an exit is the best strategy with private equity or a larger and better resourced owner providing the best route for the business to thrive and at the same time presenting longer term financial security for exiting owners and their families.

Sometimes the right opportunity almost literally lands on the doormat unexpectedly. But the benefit of having groomed the business in advance of even the possibility of such a situation arising cannot be understated if the best possible outcome is to be obtained from what will be for most business owners a once in a lifetime opportunity.

In the next quarterly KN Insight articles within this succession series, we will expand on how some of these and other challenges can be managed and the opportunities maximised

in order to build a succession strategy which will deliver the rewards from what are often years of devotion and hard work towards building a successful business.

This article was written by Jim Meakin, Corporate Tax Consultant. Jim works in conjunction with KN Tax Director, Clare Thomas. For further advice over anything covered in these articles or on wide tax related matters, please contact Jim jim.meakin@kirknewsholme.co.uk or Clare clare.thomas@kirknewsholme.co.uk

Following Jim’s series of Business Succession articles, KN will be hosting a networking event based on this topic at Caballero Lounge, The Springs, Leeds on Tuesday 21^st April.  For further information and booking link, please click here: https://wnychamber.co.uk/wp-content/uploads/2026/03/KN-BBC-invite-Apr26.pdf

 

Part Two – post budget changes you can’t ignore

In this further article we consider some of the more specific tax and financial issues related to business succession. Inevitably, with the dust having just settled on the Budget pronouncements, we look at what these mean for business owners in a succession planning context.

These were perhaps in summary a case of “bad news, but not as bad as it might have been”, at least as far as succession planning goes.

There was no “row-back” on the previously announced changes limiting inheritance tax business and agricultural reliefs to 50% of the value over and above £1m, there was never going to be (the “bad news” bit). However fears of additional tightening of the rules did not come about. No removal of the CGT uplift on death, no alignment of CGT rates with income tax, and no extension of the seven year cumulation period for IHT (the “not so bad” news).

Although there was some unexpected bad news concerning employee ownership trusts (EOTs) which have become an increasingly popular succession mechanism for business owners in the right circumstances, where the CGT exemption previously available on transfers to EOTs was reduced to a 50% relief.

So what are the issues that now have to be addressed?

For business owners and farming concerns, the reality is now established that an IHT liability may have to be faced up to at some stage when previously there would not have been one. This means that the merits of passing on the family business or farm may need to be considered sooner, subject to the need to retain personal wealth into later life. Tax planning considerations should never be a reason for later regret over giving away too soon.

For many businesses the strategy will now have to seriously address how likely IHT liabilities can be mitigated or deferred and ultimately funded. Will this be by building a fund to pay the eventual tax and how will this impact operational activities? Or will a partial or full exit be an attractive option?

For some business owners it may become more attractive to consider a structure which enables wealth to be passed on whilst retaining a degree of control. A suitably structured family investment company may assist with this and many more business owners are considering the use of trusts after a period of years when these have possibly been less favoured. For business or farm owners who wish to transfer business interests into trust, this should almost certainly be done prior to 6th April 2026, whilst the existing 100% business relief still applies, though the new rules applying the restricted relief can still bite later.

In the next article of our series we will look at some of the actions and strategies business owners should consider in terms of maximising the exit value of their business and the routes to exit which might be available.

This article was written by Jim Meakin, Corporate Tax Consultant. Jim works in conjunction with KN Tax Director, Clare Thomas. For further advice over anything covered in these articles or on wide tax related matters, please contact Jim jim.meakin@kirknewsholme.co.uk or Clare clare.thomas@kirknewsholme.co.uk

Following Jim’s series of Business Succession articles, KN will be hosting a networking event based on this topic at Caballero Lounge, The Springs, Leeds on Tuesday 21^st April.  For further information and booking link, please click here: https://wnychamber.co.uk/wp-content/uploads/2026/03/KN-BBC-invite-Apr26.pdf

 

Part Three – preparing for a sale

In previous articles, we have examined various aspects of succession planning, with particular focus on the associated tax considerations. In this article, we turn to the strategic issues involved in preparing for the sale of an entrepreneurial business.

Many business owners hold a firm view of their company’s value; however, it is often unclear whether that expectation is realistic. Others readily acknowledge that they have little understanding of the likely valuation and may be uncertain about how to determine an appropriate figure or even a reasonable valuation range.

A detailed analysis of valuation methodologies for different types of businesses falls outside the scope of this short article. Nevertheless, forming an initial view of value will typically require a careful assessment of the strategic outlook for the relevant sector, the position of the company within it, and the business’s specific strengths and weaknesses. Key questions include: What profit or revenue multiples are being achieved by genuinely comparable businesses? Who are the most likely purchasers—competitors, consolidators, private equity investors, or existing management—and what are their particular objectives or constraints? For example, a competitor who anticipates synergies and value-enhancement opportunities may be willing to pay a higher price than a management team whose ability to raise funding is more limited.

Employee Ownership Trusts (EOTs) have grown significantly in popularity in recent years. Determining whether an EOT represents an appropriate ownership structure is an important consideration. While the tax advantages—previously including full exemption from capital gains tax—have been reduced, with only half of the gain now exempt, an EOT may still provide a suitable exit route for businesses with the right culture and could represent a stable long-term ownership model.

A realistic appraisal is essential throughout this process. Irrespective of headline financial performance, a business that is heavily dependent on a management team planning to exit, offers a product range being overtaken by competitors, or relies excessively on a small number of customers may find that anticipated profit multiples are less robust. Achieving the desired price may require a longer-term commitment from the sellers or involve an “earn-out” mechanism, both of which introduce uncertainty regarding whether the headline valuation will ultimately be realised.

Maximising the exit price and identifying a purchaser willing to pay it often requires a significant period of preparation, sometimes spanning several months or even years. Measures may need to be taken to retain key members of management, possibly through equity-based incentives. Such arrangements can both motivate individuals to enhance the eventual sale price and help secure the continuity of the leadership team. Consideration may also need to be given to the business’s ownership structure and the treatment of surplus assets.

Foundational matters relating to financial or operational systems and procedures may also need review to ensure they are fit for purpose and will not hinder the due diligence process.

Engaging an appropriate advisory team is often critical to the success of this type of strategic planning. Skilled advisers can assist management and owners in identifying the key issues, developing an appropriate plan, and maintaining focus over an extended period. Achieving a successful outcome typically requires a significant investment of time and a deep understanding of the business and the owners’ objectives. The best results are often achieved through collaboration between trusted long-term advisers and specialist corporate finance and legal professionals.

This article was written by Kirk Newsholme Corporate Tax Consultant, Jim Meakin and Audit RI, David Stansfield, offering a holistic, joined up approach to the firm’s advisory services. For further advice over anything covered in these articles, please contact Jim jim.meakin@kirknewsholme.co.uk or David david.stansfield@kirknewsholme.co.uk

Following Jim’s series of Business Succession articles, KN will be hosting a networking event based on this topic at Caballero Lounge, The Springs, Leeds on Tuesday 21^st April.  For further information and booking link, please click here: https://wnychamber.co.uk/wp-content/uploads/2026/03/KN-BBC-invite-Apr26.pdf