Who this is for: For founders who intend to pass the business to the next generation and want to do it without triggering a tax event or losing governance.
Passing a business to the next generation is not a single transaction. It is a sequence of decisions, each with its own tax consequences, that must be planned together.
The three tax events are: the gift of shares (potentially triggering CGT), the IHT on the founder's estate (if the shares remain in the estate until death), and the CGT on the children's future sale (which depends on the base cost they inherit).
Gift relief
When a founder gifts shares in a trading company to a family member, the gift is a disposal for CGT purposes. The founder is treated as having sold the shares at market value. If the company has grown significantly, the CGT charge on the gift can be substantial.
Gift relief allows the CGT charge to be deferred. The founder and the recipient jointly elect to hold over the gain. The recipient takes the shares at the founder's original base cost. The CGT is deferred until the recipient sells the shares.
Gift relief is available for gifts of shares in qualifying trading companies. It is not available for gifts of shares in investment companies or holding companies that hold a significant proportion of investment assets.
The IHT interaction
A gift of shares is a potentially exempt transfer for IHT purposes. If the founder survives seven years from the date of the gift, the shares are outside the estate. If the founder dies within seven years, the shares are subject to IHT on a tapered basis.
Business Property Relief may apply to reduce the IHT charge on the gifted shares, but BPR is not guaranteed and depends on the nature of the company's activities at the date of the founder's death.
The structure that addresses all three
A SAFO structure can be designed to transfer economic value to the next generation while deferring CGT (through gift relief), removing future growth from the estate (through the capital architecture), and preserving the children's base cost for their future sale.
The gift, the IHT, and the children's future CGT are three separate tax events. The structure must address all three simultaneously.
| Planning element | Without structure | With SAFO structure |
|---|---|---|
| CGT on gift | Up to 20% on gain | Deferred via gift relief |
| IHT on estate | 40% on full value | Locked at today's value via capital architecture |
| Children's future CGT | Based on low original base cost | Based on held-over base cost (same) |
The Architecture That Protects What You Build
The decisions you make now about how your wealth is structured determine what your family actually receives. The Capital Architecture maps the full picture: extraction, succession, and IHT ring-fencing, in the order they need to be built.
The audit is free and takes five minutes. The Capital Architecture is delivered within 48 hours of your intake call.
The Constitutional Layer
Passing a business to the next generation at the Stability layer is a gift of shares, a Business Relief claim, and a conversation about the seven-year clock. The Growth layer: the new share class, a family investment company, a holding structure that separates the founder's retained value from the next generation's future growth, begins to address the exposure.
The Expansion layer is the constitutional architecture that makes the transfer a designed outcome rather than a tax event: a governance framework that determines how the next generation participates in the business, how decisions are made, and how the founder retains control without retaining the tax exposure. The families who transfer wealth intact to the next generation built this layer while the founder was still in control.