"How can IFAs help? We meet with our clients at the very least once a year; this gives us the opportunity to ensure that our clients are successfully navigating extracting profit in a tax-efficient manner space, correctly; utilising available allowances, maximising wealth accumulation and reducing corporation tax."
Advisers can also play a pivotal role in helping business owners protect their wealth during the accumulation period of their firm’s life cycle.
Batchelor adds: “Financial planners can help small business owners see planning opportunities that they might otherwise not be aware of. This can include business protection planning to ensure continuity in the event of illness or injury, providing benefits cost-effectively to employees, managing an employee workplace pension scheme, or overseeing investments on behalf of the business.
"During the accumulation phase, protection planning is particularly important. A huge amount of work and effort goes into getting a business off the ground and this can be severely jeopardised by unforeseen events if a key person is unable to work due to incapacity."
A tax-efficient exit
Running a successful small business takes years of skill and dedication and IFAs can play a pivotal role in facilitating a tax-efficient exit when the business owner is ready to sell it or wants to retire.
Corcoran says business asset disposal relief (BADR), which was previously known as entrepreneur’s relief, is one method that can facilitate a tax-efficient exit when company directors are looking to sell or retire.
BADR allows UK business owners to benefit from a reduced capital gains tax rate of 10 per cent when disposing of qualifying business assets. Options where BADR can be applicable include selling to current employees via a management buyout, or merging with or being acquired by another business.
He adds if younger family members are taking over then gifting the business – or their shares – is another option.
After seven years these assets would be outside of the business owner’s estate. If the company qualifies for business relief, then they may be able to pass it on without a tax charge.
He adds: “Early planning can help you find the right exit solution.”
Although IFAs can help business owners sell their business in a tax-efficient way, they can also give them a reality check on the importance of planning early for retirement, and not solely relying on the sale of their business in order to afford a comfortable retirement.
