The family has worked hard all their lives to create the family business it is today. Retirement may beckon in sunnier climes but all that is being prevented by HMRC. Why – because some years ago the company chose to reward its key employees by participating in a tax avoidance scheme. The scheme has more than likely been challenged by HMRC but the scheme itself has not resolved and settled. Is this what is preventing you from passing on your business?
What’s the issue(s)?
You may not want to pass on the tax problem to the next generation or any new buyers. You may not be able to put an accurate value on all your hard work in building the business up over the years. This may be because either you don’t know what HMRC are asking for, or if you do have an idea of the amount involved, the cost of any Settlement is somewhat off-putting.
Is closing down an option?
Possibly but you are unlikely to realise the full potential of the business just by selling up. Even then, the problem with HMRC will not have gone away (but you ability to pay up may have gone).
So what can be done?
Establish the true worth of the business, excluding the HMRC problem. If you are happy with that level of valuation then determine how much HMRC may be seeking either from the business or the individuals.
For example, if the business is worth say £10m and £2m is owed to HMRC, then unless an asset sale can realise £8m or more you are better off passing on the business.
That is assuming you can find a buyer.
Resolving issues with HMRC
These are not always straight forward and can take time. In my experience, resolving any HMRC issue first is the best way forward. It’s a “clean” sale. No need to be too concerned about any hidden liabilities and Warranties and Indemnities.
You can focus on continuing to drive your business forwards and passing on your business .
And packing your suitcase!