Profit Extraction and Succession Planning in OMBs

Part 1 - Profit Extraction

• Optimum mix of salary/interest/dividends Impact of increased dividend tax rates from 2026/27 and previous employee NICs cuts; and

• employer NICs and corporation tax rises

The increasing attractions of disincorporation

Tax casesconcerning profit extraction

Use of directors’ loan accounts

• Tax and other practical implications

• The impact of the increase in the s.455 CTA 2010 tax charge on overdrawn loan accounts from 6 April 2026

• Planning when making partial repayments of overdrawn loan accounts

• Finance Act 2025 provisions related to arrangements where the loan is repaid but then withdrawn again by the participator from an associate of the original company

• Dealing with loan accounts on a share sale

Distributions in specie

• the implications for several taxes

Use of alphabet shares, including a case study

Dividend waivers

• Tax and practical issues

FA 2016 anti-avoidance on company liquidations

• When capital gains might be taxed as income, including HMRC guidance

Part 2 - Succession planning

• Spreading shares around a family – CGT tips and traps The importance of holdover relief, particularly if setting up family trusts

• Business asset disposal relief for trustees

Pre-death planning in family companies

Business Property Relief (BPR) – problem areas, including:

• Property-based companies

• Cash-rich companies

• Partnership structures

• Restrictions on 100% BPR and Agricultural Property Relief (APR) from 6 April 2026 The key implications, including where property is held in trust

When Business Property Relief (BPR) is not available to mitigate IHT

Use of ‘freezer’ shares and ‘money box’ companies

The importance of obtaining ‘clearance’ before undertaking a transaction

• Case study – Using a buy-out to pass a company on to children

Demergers (statutory/liquidation/capital reduction)

• Case study on using a capital reduction demerger to demerge property from a trading company that is to be passed on to a child

Training Objectives

This course will make delegates aware of:

• The advantages and drawbacks of the different ways of extracting profits from private companies, including the impact of dividend tax rises in 2026;

• previous increases in corporation tax and employers’ National Insurance Contributions (NICs); and

• previous employee NICs reductions

Why some company owners should consider disincorporating

The tax issues and problems associated with overdrawn directors’ loan accounts

• including the increase in s.455 CTA 2010 charges on loans to participators from 6 April 2026

The tax implications and risks of dividends in specie, dividend waivers and alphabet share structures

When capital distributions on a striking off or winding up may be taxed as income

The key CGT and inheritance tax (IHT) issues when passing on shares to family members, in particular

• The new restriction (from 6 April 2026) on 100% business reliefs for IHT

• Cash-rich companies

• Partnership structures

The use of demergers and buy-outs in a succession planning context

Clearances and other compliance issues

Training Course Summary

This course will consider the many and varied tax issues related to profit extraction and succession planning in OMBs. It will cover a range of taxes and will include recent changes in legislation, guidance from HMRC and key case law, as well as several numbers-based examples and short case studies.

All relevant matters from the Autumn 2025 Finance Bill will be covered.