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Experts have issued advice to small family businesses and said they should consider how their wealth is structured, so that they can invest in new growth markets while protecting their company.

A report produced by the Federation of Small Businesses, the Small Business Index, shows that confidence of UK businesses is on the increase, with more than half of companies predicting growth for 2015.

The Business Trends report, produced by BDO, also states that confidence is increasing, with costs falling, job growth, increases in wages and low inflation. The commercial services group head and corporate partner of Shakespeares, David Stevenson, said:

“Family businesses that have survived the recent economic downturn often believe that all their capital is ‘risk capital’ and should be kept in reserve should the market crash once again.

“Although being cautious is a sensible move, family businesses could be holding on to their cash for too long and the time could be right to leverage its value more fully.”

Stevenson further added that it was possible to provide financial security for a company, while also being able to invest in future growth. Another aspect of family businesses mentioned by Stevenson was the introduction of company members who aren’t from within the family. He stated that it was possible to introduce new members into the business, establishing commitment and trust with tailored rewards.

He added that it was possible to split the worth of the company into capital gained prior to the introduction of a new member and following. The new partner earns from revenues gained since the introduction. In conclusion, Stevenson said that a common mistake of a number of small businesses was not maximising tax relief benefits, which includes the R&D Tax Credits and Entrepreneurs Relief.

What is Entrepreneurs Relief?

Claiming this benefit would result in the owner of a business paying a lower percentage of Capital Gains Tax on the disposal of business assets that fulfil the criteria. The relief has to be claimed on the self assessment tax return.

The tax relief was introduced during the 2008-09 year and is subject to a lifetime allowance, which has been amended over the years. The person claiming the relief must have owned the business assets for a complete year and, usually, the relief applies to the sale of a business or the sale of a share in a company. The lifetime allowance is now £10m, although it started at £1m. The rules and eligibility criteria are complex. For more information, contact us here at The Accountancy Partnership.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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