Business Succession vs Exit Planning for Internationally Mobile Owners

Every privately-owned business eventually faces the question of what happens next. The owner retires, relocates, wants to release capital, or simply decides it is time to move on. The range of options — a trade sale, a management buyout, a family succession, a partial sale — each carries very different commercial and tax implications. For internationally mobile business owners, the picture is further complicated by the question of which jurisdiction they are resident in at the time of any exit, and what planning was done in the years beforehand.

This guide sets out the main exit and succession routes, their key tax implications for UK-connected owners, and the specific considerations that arise for those whose business interests and residency are not solely in the UK.

This guide is for information only. Tax rules are complex, change regularly and depend on individual circumstances. Always seek independent professional advice before making any business exit decision.

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The Three Main Routes

1. Trade Sale or Institutional Buyout

The business is sold to a third party — a trade buyer (a competitor or consolidator), a private equity firm, or another investor.

What it achieves: clean exit, immediate or near-term liquidity, certainty of value.

Key tax considerations (UK):

• Capital Gains Tax arises on the gain (sale price minus cost base and allowable costs)
• Current main CGT rates for business disposals (2026/27): 18% (basic rate) or 24% (higher rate)
• Business Asset Disposal Relief (BADR): if qualifying conditions are met, a reduced 18% rate applies (2026/27) on gains up to the £1,000,000 lifetime limit — the rate was 10% to April 2025 and 14% in 2025/26
• Earn-outs and deferred consideration: if part of the price is deferred (contingent on future performance), this creates CGT complexity — the earn-out is typically valued at time of sale for CGT purposes, or a separate CGT event arises when received

For internationally mobile owners:

• If you are non-UK tax resident at the time of sale, UK CGT may not apply on the disposal — but HMRC's temporary non-residence rules catch gains made whilst non-resident if you return to the UK within five complete tax years
• Where the business has UK-source income or UK real estate, UK taxation may still apply regardless of residence
• The jurisdiction of incorporation and the location of management and control of the company affect which country can tax the corporate gain (if the company itself is being sold rather than shares)

2. Management Buyout (MBO)

The existing management team (or a combination of management and external financial backers) buys the business from the owner.

What it achieves: business continuity with a known team, potential for a staged exit, sometimes more achievable valuation alignment than a trade sale.

Key tax considerations:

• The seller's tax position is similar to a trade sale — CGT applies, BADR may be available
• Loan notes: sellers sometimes accept some consideration in the form of loan notes (deferred payment) rather than cash. Loan notes can defer CGT if structured as "qualifying corporate bonds," though this requires specialist structuring
• Earn-out: performance-related deferred consideration is common in MBOs, creating multi-year CGT events
• Warranty and indemnity insurance: increasingly standard in MBO transactions, affecting deal costs

3. Family Succession

The business is passed to the next generation — children, grandchildren or other family members.

What it achieves: preservation of the family asset, continuation of the family's involvement, legacy.

Key tax considerations:

• Gift Hold-Over Relief (UK CGT): gifts of qualifying business assets (shares in trading companies, business assets) can attract hold-over relief, deferring CGT until the recipient eventually disposes of the asset. The recipient's CGT base cost is the donor's original cost (not the market value at the date of gift)
• IHT Business Relief: shares in a qualifying trading company that have been held for at least two years typically qualify for 100% Business Relief on the first £2.5 million of combined qualifying value per person (from 6 April 2026), with 50% relief on the excess and on AIM-listed shares. Where qualifying value is within the £2.5 million allowance, no IHT arises on the business shares themselves, whether on death or as a potentially exempt transfer
• Practical challenges: family succession requires the next generation to have genuine capability and interest; governance arrangements (shareholder agreements, family charters, board structures) need to be established; succession planning typically takes years to execute properly

For internationally mobile families:

• Forced heirship: in many civil law jurisdictions (France, Spain, Italy, many Middle Eastern legal systems), children have mandatory inheritance rights that can override a UK will. If the business is held through structures in those jurisdictions, or if the owner is domiciled there, forced heirship may affect succession planning
• Domicile: UK IHT Business Relief applies only where UK IHT is engaged. If the owner has a non-UK domicile and the shares are not UK situs assets, UK IHT may not apply at all — but the local succession tax in the owner's country of domicile will

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Business Asset Disposal Relief: Current Rules and Limits

Business Asset Disposal Relief (BADR), formerly Entrepreneurs' Relief, reduces CGT on qualifying disposals to a preferential rate. That rate has risen in stages — 10% to 5 April 2025, 14% in 2025/26, and 18% from 6 April 2026.

Qualifying conditions:

• The individual must hold at least 5% of the ordinary share capital and voting rights
• The individual must be an employee or officer of the company
• The conditions must have been met for at least two years ending on the date of disposal (or the date the company ceased trading, if earlier)
• The company must be a trading company (or holding company of a trading group)

Lifetime limit: £1,000,000. At the 2026/27 BADR rate of 18% against the 24% main higher rate, the saving is 6 percentage points, so the maximum total tax saving over a lifetime is now around £60,000 (down from £100,000 when the BADR rate was 10%). For business owners whose gain substantially exceeds £1m — which is common — BADR provides only marginal benefit on the overall disposal.

BADR was significantly curtailed from its prior £10m lifetime limit in March 2020. Owners who have made prior qualifying disposals have used up some or all of their lifetime allowance.

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Business Relief for IHT: Protecting Family Wealth Across Generations

For business owners who are considering passing their business to family (rather than selling it), Business Relief is the most important IHT planning tool available.

100% Business Relief applies to:

• Shares in qualifying unquoted trading companies
• Interests in qualifying partnerships

up to the £2.5 million combined allowance per person from 6 April 2026 (originally announced as £1 million in October 2024, then raised to £2.5 million in December 2025, and transferable between spouses); qualifying value above £2.5 million attracts 50% relief (an effective 20% IHT rate), and AIM-listed shares attract 50% relief only.

Before 6 April 2026, the relief reduced the value of qualifying assets to nil for IHT purposes without limit. From 2026/27, the position is different: a business worth £5m that qualifies for Business Relief would receive 100% relief on the first £2.5m and 50% relief on the remaining £2.5m — leaving £1.25m of taxable value (£2.5m × 50%), and an IHT charge of roughly £500,000 (40% of £1.25m) rather than nil. The £2.5 million cap therefore makes a material difference to larger businesses.

Qualifying conditions (key points):

• The asset must have been owned for at least two years before death or the date of transfer
• The company must be a trading company — investment companies, property investment companies and those mainly holding investment assets do not qualify
• Excepted assets (assets not used in the business, surplus cash above trading requirements) are carved out

Business Relief interacts with succession planning: passing shares to children during your lifetime is a potentially exempt transfer (PET) for IHT. If you survive seven years, the gift is completely outside your estate. The Business Relief exemption means that even if you die within seven years, there may be no IHT charge anyway (if relief still applies at the time of the gift).

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Structuring for a Future Sale: Planning in Advance

The most significant tax savings on a business disposal typically come from planning done years before the sale, not weeks. Key strategies:

Ensuring BADR qualification: confirm the shareholding, employment and trading conditions are met and have been met for at least two years before any anticipated disposal.

Entrepreneurs and management incentive schemes: EMI options allow key employees to acquire shares at favourable CGT rates. Properly structured EMI options held by management can facilitate an MBO more efficiently.

Reorganisations: demerging business operations from investment assets (surplus property, excess cash) before a sale can ensure the trading business qualifies for Business Relief and BADR whilst investment assets are handled separately.

Gift and holdover: gifting shares to family members (with hold-over relief) before a sale locks in a lower base cost, but careful planning is needed to avoid a "gift with reservation of benefit" which would bring the gifted shares back into the IHT estate.

Non-UK residence timing: for internationally mobile owners who are not permanently UK-based, the timing of a disposal relative to UK residency status can be highly significant. Planning a sale during a period of non-UK residence — combined with care around the temporary non-residence rules — can materially reduce or eliminate UK CGT. This requires careful, specialist advice and should be planned well in advance, not on the eve of a sale.

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How Global Investments Can Help

Global Investments has over 32 years of experience working with internationally mobile business owners on wealth management and succession planning. Business exits and family succession are often the largest financial events in a business owner's life, and the planning done in advance — or the lack of it — has an outsized impact on outcomes.

We work with specialist corporate tax advisers, accountants and lawyers to help clients structure their business interests efficiently, review Business Relief qualification, assess BADR availability, and plan succession arrangements that protect family wealth across generations. For internationally mobile clients, we coordinate cross-border planning to ensure that UK tax planning is consistent with the rules in their other countries of connection.

Contact us to discuss your business and succession plans in confidence.