By Maximilian Clarke
The Institute for Family Business (IFB) yesterday (Monday) published a report that shows family owned businesses generate revenues £1.1 trillion annually, employing more than 9 million people and contributing £87.7 in tax receipts to the UK Exchequer.
The report — called ‘The UK Family Business Sector: Working to grow the UK economy’ — sensibly calls upon the Government to provide a boost for family firm with changes to the tax system in relation to Enterprise Investment Scheme (EIS) relief, and reducing red tape around employment legislation.
Boodle Hatfield, a London-based law firm specialising in family law, welcomed the report, before adding that succession planning in particular poses a significant barrier to businesses’ survival. Geoffrey Todd, a partner and head of Boodle Hatfield’s Family Business team, explains:
“The adage that the first generation builds a business, the second manages the business and the third generation loses it is sadly too often true.
“The owners of family businesses do need help in succession planning. Too often they leave it too late, which is quite understandable as it’s not always easy being in business with your family.
“One issue which families struggle with is when to bring in professional management to lead the business. There is no reason why a business cannot continue to be family owned and managed with outside expertise — indeed those businesses generally out-perform those that don’t.”
It is however Business Property Relief (BPR) that has most helped keep businesses thriving from one generation to the next.
“BPR allows one generation to pass a trading business to the next in one piece,” says Geoffrey. “Without this valuable relief from inheritance tax most family owned businesses would simply not survive the passing of more than one generation.”
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