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Most SME owners plan to keep business in the family

Daniel Liberto

The nationwide firm’s independent survey of 837 employers across a range of industries also found that 13 per cent have not yet considered succession planning and 45 per cent of SME business owners have no strategy in place to extract profit from their firms when they retire.

Despite the majority of SMEs indicating some form of plan on who will continue running operations after retirement, the research found that far less have looked at the tax implications.

According to those surveyed, 45 per cent said they do not have a clear strategy to cope with the tax implications of collecting profits from their business when they retire and 8 per cent said they did not understand the process.

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Commenting on the survey’s findings, Patrick Haines, regional head of advice for Close Brothers Asset Management, said: “It’s encouraging that the majority of SME owners plan to protect their business and its heritage, preparing children or family members to take over at the helm.

“Business owners need to ensure they have the relevant plans in place to maximise profit from their business when they retire to help fund their retirement. The hard work that goes into setting up and running a business can be lost if proper planning isn’t in position when approaching retirement.”

Adviser view: Carl Melvin, managing director of Renfrewshire-based Affluent Financial Planning, said: “People do not think ahead that much and don’t plan their exit well. It is important to highlight the need for planning. There are many people who see their business as a pension to sell, which is very risky. If you do sell, you will probably be liable for inheritance tax, which is why it is important and worthwhile to plan everything carefully with an IFA.”