Protecting Value and Planning Ahead for 2026 and beyond: A Case Study
At IN Accountancy, we support business owners through every stage of their journey, from managing risk and achieving sustainable growth to succession planning and business exit.
In this article, we look at how one (fictional) client, Tyler & Co, approached protecting their assets, protecting value, planning for Inheritance Tax (IHT), and rewarding key team members — all with a view to life beyond the founder.
Background: A Business with Heart and Heritage
Based in Stockport, Tyler & Co is a globally respected saxophone manufacturer with a rich musical legacy. The business owns its trading premises, holds significant cash reserves, and is home to an exceptional collection of vintage saxophones curated by founder Andy Tyler.
Despite its success, saxophone manufacturing, like many trades, comes with risks — particularly when it comes to protecting the business’s most valuable assets from potential liabilities.
Andy’s concern was simple. What if a legal claim or unforeseen incident threatened the financial future of the business or the cherished saxophones he’d spent decades collecting?
Protecting Value (Business Assets with a Holding Company Structure)
To help safeguard the company’s key assets, we supported Andy and his fellow directors in restructuring the business by introducing a holding company.
The aim was to create a clear separation between the high-value assets and the trading risks of the business, resulting in protecting value.
The Structure in Practice:
- A new holding company is established above the trading business.
- Through a share-for-share exchange, existing shareholders swap their shares in the trading business for shares in the new holding company.
- Key assets — such as property, cash, and the saxophone collection — are transferred to the holding company in a tax-neutral way.
- The trading business continues as normal, but the high-value assets are now legally protected should anything go wrong.
This setup doesn’t just offer protection. It also creates future flexibility. For example, Andy could sell the trading business while retaining ownership of the property and saxophone collection in the holding company.
Planning for Inheritance Tax: Preparing for Change
With the business now better protected, Andy, who is in his mid-70s, turned his attention to succession and estate planning.
Like many business owners, he had assumed that Business Property Relief (BPR) would fully exempt his shares from Inheritance Tax.
That assumption has been broadly correct — until now.
From April 2026, the rules are changing:
- A new IHT-free allowance of £1 million will apply to trading business assets.
- Any value above this threshold will be subject to 20% IHT, payable over 10 years, interest-free.
- As a result, business owners who had planned to hold onto their shares until death may now face unexpected tax exposure.
Andy had heard talk in the pub about gifting shares or using trusts. Not everything he’d heard was accurate, but some of the ideas were worth exploring.
Planning Options Considered:
- Lifetime Gifts – If Andy gifts shares during his lifetime and survives for seven years, the value falls outside his estate for IHT purposes.
- Family Trusts – A trust can remove value from Andy’s estate while allowing him to retain some control, protect the shares, and benefit future generations.
One consideration is that Andy isn’t married. Unlike spousal transfers, gifts to a life partner are not exempt from IHT, which can reduce flexibility in estate planning.
Retaining Key People: EMI Share Options and Growth Shares
Succession planning isn’t just about ownership. It’s also about people. Andy wanted to ensure that Sarah, the company’s Managing Director, felt valued and motivated to stay on as a key part of the business’s future.
Gifting shares might seem generous, but if the shares are linked to employment, Employment Related Securities (ERS) rules apply. This can create a potential Income Tax liability for the recipient.
We explored two structured and tax-efficient alternatives:
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EMI Share Options
The Enterprise Management Incentive (EMI) scheme allows selected employees to acquire shares at today’s market value at a later date, usually on a future exit.
Key advantages include:
- No tax on grant or exercise (as long as market value is used).
- Gains are taxed on sale, typically at lower Capital Gains Tax (CGT) rates.
- Options can lapse if the employee leaves, offering flexibility and control.
EMI schemes are particularly useful where a business sale is expected. However, if Andy plans to retain family ownership, EMI options may not provide Sarah with a clear route to realising value.
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Growth Shares
Growth shares give employees a right to a portion of future value only, without granting ownership of the existing business.
For example:
- If the business is currently worth £2 million, Sarah’s growth shares might only entitle her to a share of value above £2.5 million.
- On exit, she might receive 10% of that ‘growth’ — rewarding her for contributing to future success.
Because growth shares typically have no immediate value, there’s usually no up-front tax charge. Yet they can still provide dividends and create a genuine sense of ownership.
Planning for Exit: Considering an Employee Ownership Trust (EOT)
With his assets protected, tax position clarified, and leadership team aligned, Andy began to look seriously at retirement.
But there was a challenge. His family weren’t interested in taking over the business, and he was reluctant to sell to a competitor for fear of damaging the culture and reputation he’d built.
One potential solution was an Employee Ownership Trust (EOT).
What is an EOT?
An EOT is a specialist trust that holds a majority of company shares on behalf of employees.
Key benefits include:
- The seller can transfer a controlling interest tax-free, with no Capital Gains Tax.
- Employees can receive income-tax-free bonuses of up to £3,600 per year.
- Long-term employee ownership helps preserve company culture and incentivise teams.
Under this structure, employees don’t appear on the share register. Instead, trustees oversee the business, making decisions in the employees’ best interests.
If Sarah holds EMI options, she may be able to exercise them and benefit from the EOT sale, recognising her contribution to the company’s success.
It’s important to note that EOTs require a long-term view. Sale proceeds are typically paid out over time, funded by the business itself. This type of structure works best when aligned with the founder’s values and vision.
Final Thoughts
The Tyler & Co case study highlights how asset protection, tax planning, succession strategy, and staff retention are all interconnected.
Whether you’re concerned about risk, looking to reduce your IHT exposure, or thinking about life beyond your business, early planning is key. The decisions you make now can have a lasting impact on your future and the future of your team.
If you’d like to explore these options in more detail or simply understand what’s possible in protecting value, just get in touch.
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