By Sue Knight, director in Grant Thornton’s entrepreneurial private client team in Birmingham
The UK economy picked up more strongly in 2013 than expected, especially in the automotive and food and beverage sectors. All great news for West Midlands’ entrepreneurs.
It is clear that there are some very healthy businesses out there with stocks of cash, waiting for the right time to spend it. And on the other side of the coin, we are advising a number of businesses who are targeting growth and preparing for an exit with an 18 month to three-year time horizon.
Conversations at business level are focussing on issues such as how to prepare the business for a sale, due diligence matters - best considered early, especially if there are unresolved tax issues - and whether assets such as property which may not add any additional value on sale or are to be retained post sale, should be restructured now.
From the shareholders’ perspective, the availability of Entrepreneurs Relief (ER) needs to be reviewed to ensure the capital gains tax (CGT) rate is reduced to 10 per cent on the first £10million of lifetime gains, whether ER limits for other family members can be used to reduce the overall CGT tax rate further and to provide protection around the funds post sale.
This needs to be considered and any planning put in place at least 12 months before a sale.
We also expect the Rich List to show those in property, either building it or investing in it, starting to see their fortunes recovering. Support from government incentives has kick-started sectors of the property industry. Over the last 18 months we have been restructuring property assets before prices fully recover to ensure that future growth is realised tax efficiently.
We have also seen a significant increase in structuring for wealth protection and preservation to ensure that wealth and any future growth is protected and any costs which might eat into this are minimised.
Interestingly, this is not purely driven by the tax consideration, although the burden of inheritance tax still weighs heavily on the minds of many. The final strategy may not be the most tax efficient solution but provides for wealth protection and preservation.
The outlook is more positive for 2014 and whilst we are far from a return to a prosperous economy for all, there is a new level of optimism and confidence amongst many entrepreneurs, particularly those in niche markets.