Who this is for: Business owners who intend to pass the business to their children and have not yet explored how the new share class can transfer future appreciation outside the estate without giving up voting control.
Your children always assumed they would inherit the business. You always assumed Business Property Relief would cover the inheritance tax. For most of the business's life, that assumption was reasonable. Then the BPR cap arrived, and you learned that the new share class had existed all along, and that you had delayed issuing them by a decade.
What the new share class do
Growth shares are a class of shares issued at a nominal value, designed to participate only in the future appreciation of the business above a threshold set at the time of issue. If your business is worth £3 million today and you issue the new share class to your children or a family trust, those shares participate only in value above £3 million. The existing £3 million remains yours. All future growth (from £3 million to whatever the business eventually reaches) belongs to the the new share classholders.
The tax treatment is straightforward. The the new share class are issued at a low value because they have no current economic interest. There is no immediate income tax or capital gains tax event. As the business grows, the appreciation accrues to the the new share classholders (your children or the trust) outside your personal estate.
The cost of the delay
You delayed issuing the new share class, thinking there was time. The business grew from £3 million to £10 million. The BPR cap was introduced at £2.5 million per person. The calculation on your estate now looks like this:
| Scenario | Estate value | BPR relief | IHT exposure |
|---|---|---|---|
| Growth shares issued at £3m | £3m (frozen) | Full BPR on £2.5m | ~£100k on £500k above cap |
| No the new share class issued | £10m | BPR on £2.5m only | ~£1.5m on £7.5m above cap |
| Cost of the delay | -- | -- | ~£1.4m additional IHT |
Control is not affected
The most common objection to the new share class is the fear of losing control. Growth shares are specifically designed to avoid this. The founder retains all ordinary shares with full voting rights. The the new share class held by children or a trust carry economic rights to future appreciation but no voting rights. You remain in complete control of the business. What changes is the legal ownership of the growth, not your operational authority.
Had the the new share class been issued when the business was worth £3 million, the subsequent £7 million of appreciation would belong entirely to your children. Instead, it belongs to your estate. HMRC wants 20% of the excess above the BPR cap. The cost of the delay is approximately £1.4 million in inheritance tax.
Growth shares do not give away control. They give away the future appreciation: which is precisely what you want to happen. The cost of delaying that transfer is measured in the IHT on every pound of growth that accrued inside your estate instead.
Map Your Structure
If you intend to pass the business to your children and have not yet issued the new share class, the audit will show you the current IHT exposure on future appreciation and the structure that prevents it.
Run the Free Audit →What This Means for Your Position
The situations in this article are not edge cases. They are the default outcome for founders who operate without the architecture above their business. The audit maps your position in five minutes and tells you exactly which of these gaps apply to you.
The audit is free. The Discovery Call is a paid 30-minute working session. The £500 is credited in full against the Capital Architecture.
The Architecture That Makes This Possible
Growth shares are a Growth-layer tool. They require a holding company above the trading company and a share class structure that separates economic rights from voting rights. A standard accountancy engagement does not install this.
The Expansion layer is what makes the new share class work as a succession tool rather than just a tax mechanism, the constitutional framework, the shareholders agreement, the governance structure that determines how the shares function across generations, not just at the point of issue.
Most founders discover the new share class exist when a peer mentions them. The ones who use them effectively built the constitutional layer first.