Rayney’s Tax Planning for Family and Owner-Managed Companies 2020/21

Dave Wright, Tax and Accountancy Publisher

October 12, 2020

The 2020/21 edition of Rayney's Tax Planning for Family and Owner-Managed Companies is now live for subscribers to UK Tax.

Peter Rayney writes in the preface:

There are few areas of taxation that do not impact on family or owner-managed companies and their shareholders. Consequently, this book covers a wide range of tax planning matters. Its growth in size reflects the substantial increase and growing complexity in our tax legislation. I am delighted that this book is proving to be a valuable source of reference for a large number accountants, tax advisers and lawyers. It is now featured on a number of online platforms!

This year’s edition is fully up-to-date with the relevant 2020 legislative changes, as well as new practical points, emerging case law and developments in HMRC practice. Due to the Covid-19 pandemic, the Government and HMRC have had to respond quickly to provide tax and other financial assistance measures – these are also reflected in this edition.

In this book I thought it would be useful to summarise the key planning points from the separate viewpoints of the company itself, the shareholders who work for the company (usually as directors), the non-working shareholders and in some instances the employees. Only by taking that approach can the complete picture be seen – the planning checklists appear at the end of all relevant chapters. Numerous worked examples are provided to illustrate the practical tax and commercial implications for a host of typical situations (all references to characters and companies in the examples are, of course, entirely fictitious!).

Clearly there will be occasions when what is tax efficient for the company itself will not necessarily be effective for the shareholders in their capacity as individual taxpayers. This conflict need not always present a major problem, but proper regard must be had to the interests of all parties before embarking upon any tax planning exercise.

It is intended that this book will provide the complete picture on family/owner-managed company tax planning for professional advisers such as tax consultants, accountants and solicitors, and to the owners and financial directors of these types of company themselves. This book has been extensively updated since it was first published in 1995 and draws heavily on my extensive practical experience in dealing with owner-managed companies.

The book naturally enough starts with consideration of the family/owner-managed company, its structure and its operation (I have assumed that the (private) limited company is the most appropriate vehicle for the business). Consideration is then given to the corporate structure, followed by an overview of appropriate tax strategy. The book also provides a brief guide to the computation of a company’s corporation tax liability for both trading and investment companies, the revised company loss relief rules, and the impact of HMRC’s penalty regime.

I then look at specific areas affecting the family/owner-managed company, including:

  • the various methods of extracting funds from the company;
  • remuneration strategies, the two job retention schemes, treatment of employee benefit trusts and the impact of the ‘disguised remuneration’ legislation;
  • the treatment of benefits and expenses, including the company car regime;
  • treatment of personal service companies under the IR35 and ‘off-payroll-working’ regimes ; and
  • a detailed review of the pension regime as it affects owner-managers .

The main employee share schemes and arrangements are also discussed, with full coverage of the very popular Enterprise Management Incentive (EMI) share option schemes. I also consider the ways in which shares can be passed to employees who are not members of the family. Detailed practical consideration is given to the potential impact of the ‘restricted securities’ regime in the context of relatively straightforward unapproved share awards and options.

Succession planning is a vital issue for long established family or owner-managed companies and I therefore cover the relevant tax and commercial angles extensively in Chapter 17 (Succession Planning and Passing on the Family Company). It must be recognised that the next generation may not have the desire or, possibly, the ability to take over the running of the business. In such cases, a sale of the company or a management buy-out (perhaps through a purchase of own shares) must be contemplated.

Many owner managers may subsequently benefit from the Business Asset Disposal Relief (BADR) regime, which provides them with an effective 10% CGT rate on exit (on gains of up to £1 million). The BADR regime for share sales and related planning issues in relation to different deal structures is reviewed extensively in Chapter 15. Valuing a family company is a minefield when either passing on a family/owner-managed company or selling it to outsiders. The principles of commercial and fiscal share valuations – together with the potential impact of Covid-19 on valuations – are therefore discussed in some detail (see Chapter 10).

This book also covers other important tax aspects of family and owner-managed companies. These include financing issues, expanding the business by way of acquisitions, corporate reconstructions and demergers and how to wind-up the company in a tax-efficient manner as well as securing the best possible relief for any shareholder losses.

A family or owner-managed company can be an invigorating environment, and it is one that has a major role to play in the UK economy. This is evidenced by the many tax breaks that have been given to the owner-managed business sector in recent years. However, the shape of the future fiscal landscape in response to the Treasury’s post-Covid-19 finances remains a major uncertainty.

The successful company has seen a number of changes (eg the growing use of non-executive directors and the increase in demands for a specialised service or product). With proper tax planning strategies being adopted, the family or owner-managed company can look forward to continuing success. It is hoped that this book will be an indispensable guide for those involved in advising and running family and owner-managed companies.

I must give special thanks to Gillian Fitzgerald, and my wife, Patricia, for their help and support with the updating work and final editing checks for this edition of the book. I must also express my sincere appreciation to Patricia for her loving support and enthusiastic encouragement.

As ever, I owe a considerable debt of gratitude to the commitment and professionalism of the team at Bloomsbury Professional and their encouragement, with particular thanks to Jane Bradford for her sterling work. If you like this book, please tell your friends and colleagues. If you have any comments or suggestions for future editions – please email me (peter@prtaxconsulting.co.uk).