Succession Planning for Business Owners Living Abroad

For business owners who have built companies while living internationally, succession planning is one of the most complex and consequential financial planning challenges they face. Unlike a straightforward investment portfolio, a business involves people, relationships, value that depends on continued leadership, and legal structures that may span multiple jurisdictions. Getting succession planning wrong can devastate a business's value, create severe family conflict, and leave a large avoidable tax liability.

This guide addresses the specific challenges faced by business owners who live abroad — or whose business interests span multiple countries — and outlines the key planning considerations in each dimension of business succession.

What Is Business Succession Planning?

Business succession planning encompasses two related but distinct processes:

1. Management succession: who will lead the business going forward — a family member, management buyout team, or external buyer?

2. Ownership succession: how will ownership of the business transfer — through lifetime gifts, sale, employee ownership trust, or inheritance?

For internationally mobile business owners, both dimensions must be planned against the backdrop of multiple tax jurisdictions, the new UK IHT rules for long-term residents, and the succession laws of the countries where the business operates.

Why Internationally Mobile Business Owners Face Unique Challenges

Multiple Tax Jurisdictions

A UK national running a business in the UAE or Thailand faces UK IHT exposure on the business interest (if within the long-term residence period), UAE or Thai succession considerations in the country of operation, and potentially corporate tax and withholding tax implications in each jurisdiction if shares change hands.

Business Property Relief Caps

From April 2026, Business Property Relief (BPR) is capped at £2.5 million for 100% relief (the cap was originally announced as £1 million in the October 2024 Budget and raised to £2.5 million in December 2025). A business worth £5 million that previously attracted zero IHT through BPR now faces a £500,000 IHT liability on the £2.5 million excess (50% relief, a 20% effective rate). For internationally mobile owners who have not restructured their UK business interests with the new cap in mind, this is a material exposure.

Local Succession Rules

In some jurisdictions where international business owners operate, local law may restrict the transfer of business interests to non-nationals, require specific corporate structures for foreign ownership, or impose stamp duties and transfer taxes on ownership changes. These rules interact with the UK succession plan and must be addressed in each jurisdiction.

Liquidity and Valuation

Privately held businesses are illiquid. The succession plan must address how the IHT liability (if any) will be funded without forcing a sale of the business at a disadvantageous time. The business valuation for IHT, CGT, and negotiation purposes must be credible and defensible.

Step 1: Clarify the Succession Objective

Before choosing structures and instruments, the business owner must be clear about the primary objective:

• Keep the business in the family: which family member is willing and capable of running it? How is ownership transferred to them in a tax-efficient manner?
• Management buyout (MBO): the existing management team buys out the owner. This is typically funded through a combination of debt, equity, and deferred consideration.
• Sale to a third party: exit the business for full market value. CGT and withholding tax planning is central.
• Employee Ownership Trust (EOT): transfer to a trust for the benefit of all employees — CGT-exempt on the sale in many circumstances and potentially IHT-efficient.
• Hybrid: retain a minority stake while transitioning management, with a full exit over time.

Each objective implies a different structure, timeline, and tax profile. The succession plan must start with a clear answer on objective before detailed structuring begins.

Step 2: Business Property Relief Planning

Qualifying for BPR

For UK-domiciled or long-term resident business owners, the business interest may qualify for BPR, which provides either 100% or 50% relief from IHT depending on the nature of the interest. Key conditions are:

• The business must be "wholly or mainly trading" — investment businesses do not qualify.
• The shares or business interest must have been owned for at least two years.
• From April 2026, only the first £2.5 million of qualifying assets per estate attracts 100% relief; the remainder qualifies for 50% relief. (The cap was originally announced as £1 million in the October 2024 Budget and raised to £2.5 million in December 2025; the £2.5 million allowance is transferable between spouses and civil partners.)

Lifetime Gifts of Business Interests

Gifting shares or partnership interests to children or into trust before death starts the seven-year PET clock. If the donor survives seven years, the gift is outside the estate. If the recipient has owned the shares for two years and the donor dies within seven years, the recipient can claim BPR to eliminate the IHT on the failed PET.

Gifting business interests also triggers CGT on the deemed disposal at market value. However, Gift Holdover Relief is available on gifts of qualifying business assets — the gain is held over and the recipient takes the shares at the donor's original base cost. No CGT is payable until the recipient disposes of the shares.

Employee Ownership Trusts

An EOT can acquire a controlling interest (more than 50%) in a trading company. The sale of shares to an EOT by qualifying shareholders is exempt from CGT (subject to conditions), making it one of the most CGT-efficient exit routes available. The EOT must subsequently hold the shares for the benefit of all employees. From an IHT perspective, the transfer to an EOT is also potentially BPR-eligible, though the main driver for most EOT transactions is the CGT exemption and the legacy planning aspect.

For internationally mobile business owners who want to preserve the company's independence and reward a loyal workforce, the EOT route is increasingly attractive.

Step 3: Management Succession

Ownership transfer is only half the challenge. The business needs capable leadership after the owner's departure. Common models:

Family Succession

For family-owned businesses, transferring ownership to a family member requires that the successor:

• Has the skills, experience, and commitment to lead the business.
• Is accepted by the existing management and workforce.
• Has a clear plan for maintaining the culture and strategy that has driven value.

Family succession is often complicated by competing claims from multiple children, relationships between working and non-working family members, and the difficulty of managing a family business across different countries.

A Family Constitution — a formal statement of the family's values, governance principles, and expectations for family members in the business — is a valuable tool for multi-generational family businesses. It addresses questions like: must family members work elsewhere before joining the business? What are the criteria for appointment to senior roles? How are dividends distributed?

Management Buyout

An MBO requires the management team to have (or access) sufficient capital to buy out the owner. This is often structured with private equity backing or vendor finance. Key considerations for internationally mobile owners:

• UK CGT: a sale of UK-incorporated business shares is subject to UK CGT regardless of the seller's residence, unless treaty provisions apply. Entrepreneurs' Relief (now Business Asset Disposal Relief — BADR) may reduce the effective CGT rate to 14% (as of 2025/26) on qualifying gains.
• Local tax: the sale of shares in a business incorporated locally (e.g. a UAE FZE or Thai Limited Company) is subject to local tax rules and any applicable capital gains treatment.
• Deferred consideration and earn-outs: where part of the purchase price is deferred, care is needed around the timing and character of the resulting income or gain in each relevant jurisdiction.

Third-Party Sale

A full sale to a strategic buyer or private equity firm is typically the highest-value exit, but requires the most preparation — clean corporate structure, audited accounts, minimised related-party transactions, and a period of clean trading. For internationally mobile owners, the timing of the sale relative to UK and local tax residency can materially affect the after-tax proceeds.

Step 4: Corporate Restructuring Before Succession

Many businesses benefit from restructuring before succession planning is finalised:

Holding Company Structure

Placing a UK operating company under a holding company structure allows:

• Investment assets (surplus cash, investment properties) to be separated from trading assets — protecting BPR eligibility on the trading business.
• Dividend extraction to be managed efficiently.
• Future share gifts or sales to be structured at the holding company level.

Equalising Shareholdings

Where multiple family members are involved, equalising shareholdings before value increases — through share reclassification or new share issues — can transfer future growth outside the estate without immediate IHT or CGT implications.

Splitting the Business

If the business has both qualifying trading activities and non-qualifying investment activities, separating them into distinct entities ensures that BPR applies to the trading element without being contaminated by the investment component.

Step 5: Wills and Cross-Border Succession

A business interest in a UK company should be clearly addressed in the owner's UK will. Where the business is operated through companies in other jurisdictions, the succession of shares in each foreign company may require separate provisions in a local will or equivalent succession document.

For owners living in civil law jurisdictions with forced heirship rules (France, Spain, many others), the succession of business interests may be subject to local forced heirship provisions that can result in the business being split among multiple heirs involuntarily. Advance planning — through a trust structure, a shareholders' agreement with pre-emption rights, or appropriate use of the EU Succession Regulation — can address this.

The EU Succession Regulation (Brussels IV) allows EU residents to elect for the law of their nationality to govern their estate rather than the law of the country where they are habitually resident. For UK nationals now outside the EU, the regulation no longer applies directly, though some member states still extend it to non-EU nationals in specific circumstances.

Step 6: Shareholder Agreements

For jointly owned businesses, a shareholders' agreement (or partnership agreement) is essential to ensure that the succession plan is aligned with the arrangements between co-owners. Key provisions include:

• Pre-emption rights: existing shareholders have the right to buy shares before they are transferred to a third party (including family members of other shareholders).
• Drag-along rights: majority shareholders can require minority shareholders to sell in a third-party transaction.
• Tag-along rights: minority shareholders can participate in a sale if the majority sells.
• Compulsory transfer provisions: on death, incapacity, or dispute, the shares are dealt with as agreed — not left to probate or contested inheritance.
• Valuation mechanism: agreement in advance on how shares are valued, avoiding disputed valuations on a compulsory transfer.

These provisions must be reviewed in conjunction with the succession plan to ensure they do not inadvertently restrict the desired outcome.

Step 7: Life Assurance for Business Succession

Two types of life assurance are particularly relevant:

• Shareholder protection: each shareholder insures against the death of the others, with the proceeds used to buy out the deceased's shares. This ensures the surviving shareholders can retain control without relying on a family member of the deceased who may have no interest in the business.
• Key person insurance: insures the business against the financial impact of losing a key individual — provides funds to hire a replacement or support the business through the transition period.

For internationally mobile business owners, these policies must be structured appropriately in the country of residence to ensure they are tax-efficient and legally valid.

How Global Investments Can Help

At Global Investments, we work with internationally mobile business owners at every stage of succession planning — from the initial objective-setting through to execution, whether that means a family gift, an EOT transaction, or a third-party sale.

We provide:

• Business interest valuation and IHT exposure analysis under the new BPR cap.
• Coordination of corporate restructuring with specialist legal and tax advisers.
• CGT and IHT modelling for different succession scenarios.
• EOT feasibility assessment and transaction support.
• Cross-border succession planning, coordinating UK and local advisers in each relevant jurisdiction.
• Integration of business succession with the broader family estate plan, trust structures, and investment strategy.

Succession planning for a business is not a single document or transaction — it is an ongoing process that must be reviewed as the business evolves, family circumstances change, and the law shifts. The consequences of inaction are too significant to defer. Tax treatment depends on individual circumstances and the law changes; all figures in this guide are as of 2026. Please seek professional advice tailored to your situation.