Advanced Tax Planning for Company Owners: Exit and Succession

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Exit and Succession Tax Planning for Company Owners and Their Advisers

By Nick Wright BSc, FCA, CTA

A generation of owners who built their companies over the last two or three decades is now asking how to leave the business rather than how to grow it. That question has two parts: realising value and taking the cash (exit), or passing the company to the family or the management team (succession). The two pull the tax analysis in different directions, and after the 2024 and 2025 Budgets the decision is both more pressing and more expensive to get wrong.

In this 2026/27 report, Chartered Accountant and Chartered Tax Adviser Nick Wright sets out how each of the main exit and succession routes is taxed, the reliefs each one opens or closes off, the preparation that protects those reliefs and the anti-avoidance rules that sit over all of it, so that owners and their advisers can match the structure to what the owner actually wants.

What Is Exit and Succession Planning?

Exit and succession planning covers how the owner of a private company transfers ownership and realises value, whether to a third party, to management, to employees or to the next generation of the family. This report deals with companies: the disposal of shares in, or the reorganisation of, a private trading company, rather than the sale of an unincorporated business.

Few areas of tax practice involve so many regimes at once. A single transaction will often engage capital gains tax on the shareholder, corporation tax on the company, the employment-related securities rules where managers acquire shares, the transactions in securities code where value is taken out in capital form, inheritance tax where there is any element of gift, and stamp taxes on the transfer of shares or land. A structure that works for capital gains tax can be expensive for stamp duty, and a step that secures an income tax exemption can give up a death uplift worth more than the tax saved.

Exit and Succession Tax Traps and HMRC Risk

For most of the last decade the default advice was stable: business asset disposal relief at 10% on up to £10m of gains, tax-free sales to employee ownership trusts, and trading company shares passing on death free of inheritance tax without limit. Two Budgets have taken that apart. Business asset disposal relief is now charged at 18% on a lifetime limit of £1m, so it is worth at most £60,000. Relief on a sale to an employee ownership trust has been halved, leaving an effective 12% charge. And from 6 April 2026, 100% business property relief is capped at £2.5m per person, exposing value above that to an effective 20% inheritance tax charge.

The anti-avoidance rule that governs every share exchange, TCGA 1992, s 137, has also been rewritten for issues of shares or debentures on or after 26 November 2025. The bona fide commercial purpose test has gone, along with the 5% de minimis, and the rule now applies wherever one of the main purposes of any of the arrangements is to reduce or avoid tax. Elsewhere, a company buyback that fails the capital conditions is taxed as a dividend at up to 39.35%, and a buyback paid for in instalments is void under company law, which can leave a former shareholder still entitled to half the proceeds of a later sale.

Get the structure right and start early, and the owner keeps every option open. Get it wrong, or leave it until a buyer is already at the table, and the cost can easily run to hundreds of thousands of pounds.

What This Report Covers

In ten chapters, with more than ten worked examples and case studies, seven key tax cases and appendices of statutory provisions and terms, this 2026/27 report will show you how to:

• Compare the five main exit routes on process, cash profile and capital gains tax before any structure is designed
• Confirm and protect trading status, the gateway to business asset disposal relief, gift holdover relief and business property relief
• Separate investment property from the trade ahead of a sale, and see when a capital reduction demerger beats the alternatives
• Decide between a share sale and an asset sale, and understand what the second layer of tax actually costs
• Meet the business asset disposal relief conditions and structure deferred consideration, earn-outs and loan notes
• Pass shares to the family with holdover relief while avoiding the employment-related securities trap
• Weigh a lifetime gift against retaining shares until death under the capped business property relief regime
• Structure a management buyout through BidCo, choose between QCB and non-QCB loan notes and obtain HMRC clearances
• Secure capital treatment on a company purchase of own shares and avoid a void buyback
• Qualify for employee ownership trust relief after the 2025 Budget and protect it through the four-year clawback window
• Compare net proceeds across every route and build in the lead time the qualifying periods demand
• Plus much more...

Trading status and preparing the business

Why a single non-trading asset can put five reliefs at risk at once, and how HMRC and the tribunals apply the "substantial" non-trading activities test, with analysis of Potter and Assem Allam. The guide sets out the routes for moving investment property out of a company before a sale, including a worked comparison in which a capital reduction demerger saves around £1.56m against the next best option, and explains why timing and documented commercial reasons are essential under the anti-avoidance rules.

Third-party trade sales

Share sale or asset sale, and why the double tax charge on an asset sale costs the shareholders in one example about £740,000. The guide covers the business asset disposal relief conditions, including the nominal value and officer or employee traps, and how cash, deferred consideration, earn-outs, loan notes and shares in the buyer are taxed. A worked £4m sale shows each vendor owing tax on £500,000 they have not yet received.

Family succession

Holdover relief under TCGA 1992, s 165 and the non-business assets restriction, including the goodwill quirk that draft legislation is due to fix from 6 April 2027, with a case study of a 20% gift to a daughter who works in the business. The guide also covers the employment-related securities trap, the £2.5m business property relief allowance from 6 April 2026, and the choice between a lifetime gift, retention to death and a gift into trust.

Management buyouts

Why a direct sale to managers fails on funding and how the BidCo structure solves it. The guide works through the reorganisation rules in s 135, QCB and non-QCB loan notes, the rewritten s 137 and the cases that prompted it, loans to participators, the stamp duty cancellation scheme, s 138 and s 701 clearances, and the transactions in securities code where the vendor keeps a stake.

Company purchase of own shares

Why a buyback is an income distribution by default, the capital treatment conditions in CTA 2010, Part 23, Chapter 3, and the company law cash requirement that makes an instalment buyback void. The guide explains how multiple completion buybacks work, how HMRC now applies the 30% connection test to legal rather than beneficial ownership, and how to size the first tranche so that capital treatment is secured.

Employee ownership trusts and choosing the route

The 50% relief for disposals on or after 26 November 2025, the seven relief requirements, the "any class" excluded participator trap, funding the deferred consideration, the four-year clawback, selling out of an EOT and tax-free bonuses of up to £3,600. The final chapters compare net proceeds across every route at three deal sizes and set out the common pitfalls and the lead time a succession realistically needs.

Who Will Benefit From This Report?

This report is written for accountants, tax advisers and solicitors advising owner-managed trading companies on exit and succession, and for company owners planning to sell, step back or pass the business on who want to understand their options before they commit. Whether the likely route is a trade sale, a management buyout, an employee ownership trust, a buyback or a family succession, it sets out the 2026/27 tax position and the points where these transactions most often go wrong.

If you own, run or advise a private trading company and an exit is on the horizon, this report belongs on your shelf.

About Nick Wright FCA CTA

Nick Wright BSc, FCA, CTA is a Director and Head of Corporate Tax at Jerroms Miller Specialist Tax, an award-winning firm of tax advisers supporting accountants, tax advisers, solicitors and their clients. He specialises in complex corporate tax matters, including transactions tax, company reconstructions, management buyouts, employee ownership trusts and employee share schemes.

Nick contributes regularly to Taxation, Tax Journal, Tax Adviser, Tax Insider and ICAEW Taxline, and is a contributing author of Tolley Tax Planning. He lectures widely to fellow professionals and hosts "The Tax Hour" podcast.