Family businesses have been supported for decades with a policy environment that incentivises them to succeed over generations. As a result, family businesses now make up a significant segment of the UK economy, supporting the ambitions of all governments to deliver a growing, stable and prosperous economy that supports good jobs.
Any changes to that stable and supportive policy environment must be considered in the context of the impact they may have on family businesses and the wider economic landscape.
UK plc needs a mix of different business types to maintain economic resilience – you do not want a business base full of Ubers. Family businesses are more trusted, and we provide significant social impact through looking after people in the right way.
5th generation family business outlining how BPR enables family businesses to reinvest revenue.
The Impact of Failing to Retain the Two Reliefs Various policy arguments have been debated around the need to retain Business Property Relief and Gift Holdover Relief, with many of the debates focusing on whether BPR enables effective succession planning, facilitates tax avoidance or results in less productive businesses. Whilst these debates continue, what cannot be contested is the impact that failing to retain the two reliefs could have on family businesses up and down the country. Family businesses engaged as part of this paper have been clear that any policy decision that fails to retain the two reliefs would likely result in family businesses being broken up, offshoring or, in the worst-case scenario, closing operations entirely. These potential outcomes are explained by the significant personal tax liabilities that would fall upon many family business owners if the two reliefs were removed. It is common for family business owners to have much of their wealth tied up within the assets of the business. Any IHT levied on the transfer of shares and / or assets following the death of the business owner would, in all likelihood, have to be covered through the sale of assets or shares to third parties, or the extraction of cash from the businesses via dividend or share buyback.
Some family businesses would progress these actions resulting in the possible break up of the business, sale of assets to non-family investors, or the closure of all operations by those unable to cover the financial costs incurred.
Clearly, the potential loss of well-established and fledgling family businesses – unable to cover the substantial tax burdens resulting from significant reform, or removal to the two reliefs – would have considerable negative impacts on the UK economy, including: l The diminishing of strong family brands. Brands that are intertwined with the UK’s economy would be diminished or lost as families resort to breaking up, offshoring or closing operations to cover the significant increases in tax.
l A rise in unemployment. Employees – loyal to family businesses – would lose their jobs leading to, amongst other things, a fall in tax revenue for the Government and a rise in welfare payments.
l A decrease in investment. Fewer family businesses would be positioned to reinvest in their businesses, reinforcing the UK’s current relatively poor business investment performance.
l A decrease in business diversity. The family business ownership structure would be lost, diminishing the UK’s business diversity and economic resilience.
11
Made with FlippingBook - professional solution for displaying marketing and sales documents online