How to retain tax-efficiency after selling a business

Running a business is a labour of love. Whether your clients have run a large multinational or are the third generation of a local family-owned business, taking the decision to sell will be ultimately be one of the biggest decisions they ever take.

Many are likely to feel relief once a sale is completed. However, the vast majority are left with a substantial amount of capital that puts their estate well above the inheritance tax (IHT) nil-rate band. This capital also no longer benefits from many of the tax efficiencies it did when it was within the business.

As part of the Stellar Business IHT Service, we offer our Enable Strategy. This involves utilising proceeds from the sale of a business to create a new Stellar Business Company (or Companies) which in turn will make investments across our range of qualifying business activities.

This strategy can not only help your clients to maintain inheritance tax efficiency. They can also mitigate or defer capital gains tax in addition to potentially benefitting from Entrepreneurs’ Relief.

Important Information: The case study below is for investment professionals only. Business Relief will not be right for every client. It puts client capital at risk as well as additional considerations that we will explain in more detail within the case study.

Meet the Greencoats

Terry Greencoat inherited the family’s manufacturing business twenty years ago. He has recently sold the company and is looking forward to retirement with his wife June.

Mr Greencoat received £5 million from the sale of the business and now no longer works for the company. Mr Greencoat is 65 and his wife is 62. They have two children, both of whom have had a good start to their respective professional careers.

Mr & Mrs Greencoat now need to start making definitive plans for their legacy and have an estate significantly above the IHT nil-rate band. Their financial adviser has made them aware of Entrepreneurs’ Relief and they have some time before any payment of tax is due.

Ten years ago, their adviser recommended a number of trusts be set up for the children. The Greencoats are therefore exploring options for the proceeds from the sale of the business.

What inheritance tax planning could the Greencoats do after selling their business? 

Their financial adviser has discussed the use of Business Relief for the Greencoats, since they had the potential benefit of this relief whilst they owned the company.

By setting up their own company through the Stellar Business IHT Service, they should continue to get 100% relief from IHT on the capital invested. Their adviser confirmed that because they had owned the company for more than two years, the IHT relief could be reinstated by investing an amount, up to the proceeds of the sale of the old company, in a Stellar Business Company.

The IHT relief would be available once the Stellar Business Company was trading. The adviser noted that this was available under the Replacement Provisions of Business Relief.

Could the Greencoats mitigate or defer their capital gains tax liabilities?

The Greencoats had been made aware that up to £1 million of the proceeds should qualify for Entrepreneurs’ Relief. The adviser again pointed out that this can be mitigated entirely if the proceeds are reinvested in a qualifying business. The Greencoats liked this because it meant they should save a significant amount of capital gains tax and benefit from 100% relief from IHT.

What solution did the Greencoats opt for?

A few weeks later, following meetings with both their accountant and financial adviser, the Greencoats invested £5 million in the Stellar Business Inheritance Tax Service.

If the Greencoats held the shares in the Stellar Business Company until death, then the capital gains tax would be saved permanently. The capital was invested in their name and allowed the Greencoats to pass a tax-free legacy to their children, with relief from IHT of £2 million and a potential saving of a significant amount of capital gains tax.

Whilst the Greencoats decided this strategy would work for them, there are never any guarantees in the world of investment. As a result, it is essential that advisers make their clients aware of the risks.

Our Inheritance Tax Services are not suitable for everyone. Click here for more information about the risks of investing with the Stellar Business IHT Service.

If you would like to find out more information about the Stellar Business IHT Service and how it could work for your clients, please get in touch with one of our team today on 020 3195 3500 or contact


Written by Jack Dobinson


Important Information

Stellar Asset Management Limited does not offer investment or tax advice or make recommendations regarding investments. Prospective investors should ensure that they read the brochure and fully understand the risk factors before making any investment decision. The value of investments and the income from them may fall as well as rise and is not guaranteed. No assurance or guarantee is given that any targeted returns will be achieved. Forecasts of potential future results are not a reliable indicator of actual future results.

Stellar Asset Management Limited of 20 Chapel Street, Liverpool, L3 9AG is authorised and regulated by the Financial Conduct Authority.