Senior executive perceptions of the impact of capital taxation upon UK unquoted companies

The authors present findings from the initial phase of an ongoing, externally funded research project into the impact of UK capital taxation upon unquoted companies incorporated in the UK. Open-ended interviews were conducted with the senior executives of six unquoted companies, which are also multigenerational family businesses. The interviewers guided the executives to explore the history of their company, the values and aspirations of the founding/owning family/families, the impact of capital taxation regimes, previous and current, on both ownership and management succession, the affect of management style and policies and procedures for managing capital taxation. Using content analysis to identify key themes, the findings indicate that capital taxation may have a major impact on both ownership and management succession and on succession planning. However, the current capital tax regime in the UK is perceived to be more favourable than previous regimes and vis-à-vis the regimes currently operating in most European countries. Capital taxation is not thought to influence operational decisions either positively or negatively. Companies use taxation planning devises, frequently involving trusts, in order to reduce the actual burden of capital taxation falling upon individual shareholders at ownership succession. The present capital taxation regime including gift relief, business asset taper relief within Capital Gains Tax, and one hundred per cent business property relief on inheritance, eases succession planning. Business asset taper relief also facilitates shareholder exit strategies. Other issues which emerged through the interviews include: (a) family management versus professional management; (b) management of shareholders; (c) growth aspirations of family and non-family business executives; (f) stewardship versus wealth maximisation; and (g) business continuity versus personal asset realisation.