The UK-based Institute for Family Business has recommended that the rules governing creation of a family business trust be simplified so that families can plan their succession successfully.
According to IFB, family businesses use trusts to ensure stable management of the business, especially when handing over control to the next generation.
In a statement, the IFB director general Grant Gordon said: "Failure to plan properly for succession is the biggest threat to the survival of family firms through the generations and trusts greatly help with the difficulties associated with the transition of ownership. When ownership succession is poorly managed it can jeopardise the growth prospects of an otherwise healthy company, putting jobs at risk."
For a family business to create a trust can be a costly affair. Even more expensive is the cost of compliance – it can cost a six-figure-sum to review the tax status of a family business trust, says IFB.
The IFB, in its proposal to the Office for Tax Simplification, has requested HM Treasury to launch a "family business trust" which exempts businesses from tax charges and reduces compliance costs.
IFB is an independent and not-for-profit association established to support UK family businesses.
Want to get the latest family business/family office news direct to your desktop? Click here to register to receive our weekly newsletter
Are you a member of a multigenerational family business or family office? Click here to subscribe to our magazines