Will for a Business Owner UK (2026): Business Property Relief, Shareholder Agreements, and Succession Planning

Business Property Relief (BPR) under IHTA 1984 ss.103-114 can eliminate IHT on qualifying business interests — but the way the will is drafted determines whether BPR is actually available: (1) BPR RATES: 100% BPR applies to: (a) a business or an interest in a business (sole trader, partnership share); (b) unquoted shares in a qualifying trading company (including AIM-listed shares); (c) shareholdings giving control of a quoted company. 50% BPR applies to: (a) assets used in a business or partnership but owned personally; (b) shares giving minority control in a quoted company. From April 2026 (as announced in the Autumn Budget 2024), BPR is CAPPED at £1,000,000 at 100% relief per person — any value above £1m qualifying for BPR will only attract 50% relief. Take specialist advice if business assets exceed this threshold; (2) QUALIFYING PERIOD: the business asset must have been owned for at least TWO YEARS before death to qualify for BPR; (3) THE WILL MUST DIRECT BPR ASSETS CORRECTLY: if the will leaves business assets (qualifying for BPR) and non-business assets together to the same beneficiary, the IHT calculation takes account of the BPR position. The will should ideally leave BPR assets to beneficiaries who will not immediately have to pay IHT on them — leaving BPR assets to the surviving spouse under the spousal exemption simply defers BPR to the second death (when the survivor must own the assets for 2 years again); (4) BPR ON DEATH RESETS THE CLOCK: where a surviving spouse inherits business assets and the clock 'restarts', care must be taken that the 2-year ownership condition is met before the second death. IHTA 1984 s.109 provides some carve-out — if the spouse inherited from the deceased, their period of ownership includes the deceased's period for BPR purposes; (5) WHOLLY OR MAINLY TRADING TEST: the business must be wholly or mainly trading (not investment) to qualify. Investment businesses, businesses mainly dealing in land or investments, and holding companies fail this test.

A shareholder agreement in a private company frequently includes provisions that directly interact with what happens to shares on a shareholder's death — sometimes conflicting with the will: (1) SHARE TRANSFER RESTRICTIONS IN ARTICLES AND SHAREHOLDER AGREEMENTS: most private company articles and shareholder agreements restrict the transfer of shares. On a shareholder's death, the personal representatives inherit the shares and may need the other shareholders' consent to transfer them to the intended beneficiary. The will cannot override these restrictions; (2) PRE-EMPTION RIGHTS: the shareholder agreement or articles of association often grant remaining shareholders a RIGHT OF FIRST REFUSAL (pre-emption right) if the deceased's shares are to be sold. The personal representatives may be required to offer the shares to the other shareholders before transferring them under the will; (3) BUY-SELL (CROSS-OPTION) AGREEMENT: a buy-sell agreement (also called a cross-option or double option agreement) is often set up alongside a shareholder agreement and life insurance: (a) on one shareholder's death, the surviving shareholders have an OPTION TO BUY the deceased's shares; (b) simultaneously, the deceased's estate has an OPTION TO SELL the shares; (c) the purchase price is funded by LIFE INSURANCE — each shareholder takes out a policy on the other shareholders' lives, written in trust for the surviving shareholders. This ensures the surviving shareholders can buy the shares without using business cash; (d) BPR PROTECTION: a carefully structured cross-option agreement preserves BPR on the shares for IHT — the option structure avoids a binding contract for sale (which would disqualify BPR under IHTA 1984 s.113); (4) WHAT THE WILL SHOULD SAY: the will should NOT attempt to leave business shares to a specific beneficiary in a way that conflicts with shareholder agreement restrictions. Instead, the will should direct the executor to deal with business interests in accordance with any shareholder agreement. The executor should be given wide powers to deal with business assets; (5) BUSINESS LPA: if the business owner loses capacity, an LPA (or separate enduring/personal authority) should authorise attorneys to act for the business — keeping the company running while the owner is alive but incapacitated.

The choice of executor is especially important for a business owner — the executor may need to manage a business, deal with a shareholder agreement, and ensure BPR is claimed: (1) COMMERCIAL EXPERTISE: a sole trader or partner's executor must be capable of managing or winding down the business during the estate administration. If the personal executor (e.g. a spouse) has no business experience, the business may deteriorate or cease trading before it can be transferred to the intended beneficiary; (2) PROFESSIONAL EXECUTOR: appointing a professional executor (solicitor or trust corporation) alongside a family executor provides: (a) expertise in dealing with business assets; (b) continuity — a professional executor does not die or lose capacity; (c) independence — useful where there is a dispute between business partners and family members; (3) SPECIFIC BUSINESS EXECUTOR: consider appointing a business partner or trusted colleague as an additional executor SOLELY in relation to the business — with appropriate powers under the will to: (a) carry on the business as a going concern; (b) sell the business; (c) take decisions under any shareholder agreement; (d) claim BPR; (4) EXECUTOR'S POWERS — CARRYING ON THE BUSINESS: the will should expressly grant the executor the power to carry on a sole trader business for the benefit of the estate. Without an express power, the executor may be personally liable for business debts incurred during administration. The power should cover: (a) employing staff; (b) entering contracts; (c) using estate funds as working capital; (d) selling the business as a going concern; (5) TRUSTEES FOR BUSINESS ASSETS: where the will leaves business assets into a trust (for minor children or on life interest terms), the trustees should also have expertise or access to professional advice. The trust deed (or will) should grant trustees the power to hold, manage, and sell business assets — and to delegate management.

A business owner's LPA needs to go beyond the standard personal LPA provisions — the attorney must be empowered to keep the business running: (1) PROPERTY AND FINANCIAL AFFAIRS LPA — ESSENTIAL: a business owner must have a Property and Financial Affairs LPA. Without one, if they lose capacity, their business bank accounts may be frozen, contracts cannot be signed, staff cannot be paid, and suppliers cannot be managed. The Court of Protection can appoint a deputy — but this takes months and may be too late to save a business; (2) BUSINESS POWERS IN THE LPA: the LPA document should (or the donor should ensure the attorney understands they have authority to) cover: (a) running the business — keeping it going as a trading entity; (b) signing contracts and employing staff; (c) accessing business bank accounts; (d) dealing with business tax affairs (including authorising agents on HMRC); (e) making routine business decisions; (3) RESTRICTIONS ON BUSINESS POWERS: consider whether the LPA should restrict the attorney from: (a) selling the business without independent valuation; (b) taking on major debt; (c) bringing in new partners; these restrictions protect the donor from an attorney making irreversible decisions; (4) MULTIPLE ATTORNEYS — SEPARATE PERSONAL AND BUSINESS: some business owners appoint one attorney for personal finances and a different attorney (or jointly: a business partner) for business affairs. LPAs can be drafted with different replacement attorneys for different types of decisions — but this requires careful drafting and may create conflicts; (5) COMPANY DIRECTORS AND LPAs: an LPA does NOT automatically authorise the attorney to act as a company DIRECTOR — directorship is a personal office that cannot be delegated under an LPA. The attorney can exercise SHAREHOLDER RIGHTS on behalf of the incapacitated donor (voting shares, receiving dividends) but cannot act in the donor's capacity as director. The board may need to appoint a replacement director or take other steps to maintain governance.

A business owner's will should include several provisions not typically found in a personal will: (1) SPECIFIC BEQUEST OF BUSINESS INTEREST: the will should specifically identify and deal with the business interest: (a) for a sole trader: leave the business assets and goodwill to named beneficiaries; (b) for a partnership: leave the partnership share to a person who can become a partner under the partnership agreement; (c) for a company: leave the shares to named beneficiaries or into a trust for family members; (2) BPR SPECIFIC GIFT TO MAXIMISE RELIEF: where the deceased has both BPR and non-BPR assets, the will can be structured to: (a) leave BPR assets (business interests) to non-spouse beneficiaries (children) — using the BPR to eliminate IHT on that portion; (b) leave non-BPR assets to the surviving spouse — using the spousal exemption; (c) this 'two-pot' approach can reduce the overall IHT bill significantly; (3) DEBT OWED BY BUSINESS TO OWNER: if the owner has lent money to the company, the loan is an ASSET of the estate. The will should deal with what happens to the loan on death — whether it is to be called in, forgiven (legacy to the company), or left outstanding; (4) PARTNERSHIP CONTINUATION CLAUSE: where the deceased is a partner, the will should deal with: (a) whether the partnership is to be carried on (usually not without specific authority); (b) the executor's powers to settle partnership accounts; (c) how to value and distribute the partnership share; (5) SHARE SCHEME AND OPTION ASSETS: if the business owner participates in an EMI option scheme, CSOP, or SAYE scheme, the will and executors need to understand: (a) what happens to unapproved options on death (usually lapse within 12 months — exercise before death is more beneficial); (b) the income tax treatment on exercise; (c) CGT on disposal of resulting shares; (6) UPDATED WILL ESSENTIAL AFTER BUSINESS CHANGES: whenever there is a major change in the business — new partner, share sale, change in company structure, taking on major debt — the will should be reviewed. Business wills go out of date much faster than personal wills.