8:00 AM, 26th August 2025, About 5 months ago 1
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Mark and Emma had built their property business steadily over two decades. With a portfolio of fifteen rental properties, ten residential and five commercial, the income supported their lifestyle, and the routine gave them purpose.
They were not under pressure to make changes. What they wanted was the flexibility to reduce their personal involvement, realise some of the value they had created, and plan for future involvement of their family, all without disrupting the performance of the business or losing control.
They were looking to evolve the business on their own terms.
“The business worked well. We just needed it to work differently.”
Mark and Emma initially considered selling some of the properties to release value and reduce their workload, but this approach had drawbacks.
Selling properties from personal ownership would have triggered Capital Gains Tax liabilities of more than £280,000. It would also have permanently reduced their rental income and narrowed their future planning options.
They decided instead to restructure the business as a whole, creating a new legal framework that gave them flexibility, protection, and better tools for managing change.
The business was incorporated using Section 162 of the Taxation of Chargeable Gains Act 1992. This provision allowed Mark and Emma to transfer the entire rental portfolio into a new company in exchange for shares, deferring their capital gains until a future disposal.
This step did not remove tax obligations. It deferred them, in line with legislation designed to support the incorporation of genuine, income-producing businesses.
They transferred their equity, the net value of the portfolio after deducting debt, into the company and received two classes of shares in return. The incorporation was carried out by professional advisers and reflected the real commercial operation of the business.
No artificial arrangements were introduced. The structure aligned fully with the principle of legislative choice under GAAR Part D 2.2 and did not meet any hallmarks for registration under the DOTAS regime.
Had Mark and Emma chosen to sell properties while still in personal ownership, they would have triggered immediate Capital Gains Tax liabilities based on the difference between their original acquisition cost and current market value. By incorporating the business first under Section 162, those gains were rolled over into the base cost of their shares. This means future gains will only arise if they choose to dispose of their shares, rather than as a result of the company selling properties. Selling assets at company level after incorporation does not trigger CGT for shareholders and allows for proceeds to be retained or distributed in a more controlled way.
Several of the properties were financed under a commercial facility. Rather than refinance, Mark and Emma worked with their lender to novate the borrowing into the new company.
Novation is a legal process that transfers the rights and obligations of a loan from one party to another, with lender approval. In this case, it allowed the company to step into the original facility agreement without altering its terms.
This preserved the continuity of the borrowing, supported the CGT rollover relief, and avoided the need for reapplication, fees, or changes to security.
Novation is still considered by corporate relationship-based lenders (e.g. Barclays Commercial, Handelsbanken, Lloyds Commercial etc.), where the structure is commercially sound and supported by professional planning.
Mark and Emma’s new Family Investment Company issued a share structure tailored to their goals.
Ordinary Voting Shares
These shares gave Mark and Emma full control as directors and shareholders. They retained authority over all company decisions, including dividends, appointments and asset management. This class of shares absorbed the pre-incorporation capital gains that had built up in the properties prior to incorporation.
Redeemable Preference Shares
These were issued to reflect the positive capital account balances Mark and Emma had built in their unincorporated business, either through investment or profits retained in the business after taxation. The shares could be redeemed gradually using company profits or proceeds from future property sales.
Redemption of these shares would allow Mark and Emma to realise capital they had invested in the business, in cash, over time, without transferring ownership or triggering personal capital gains.
Freezer Shares
Twelve classes of freezer shares were created and retained within the company. These shares carried no value at incorporation but could be gifted or activated in future to support family planning. No shares were gifted at the time. The structure simply preserved the option.
Growth Shares Held in Trust
A discretionary trust was used to hold a class of growth shares, entitled only to the future increase in value of the company from the date of incorporation onwards. This ensured that any uplift would be kept outside Mark and Emma’s personal estates, with flexible benefits for family members at the trustees’ discretion.
Every element of the share structure was documented professionally. The company’s articles and shareholders’ agreement were tailored to ensure long-term clarity, protection and flexibility.
With the structure in place, Mark and Emma were able to reduce their day-to-day involvement in the business while retaining full strategic control.
They remained directors and continued to make all major decisions. The company now held all assets, managed all income and borrowing, and provided a structured route to access value through dividend payments and share redemptions.
Because the company could retain profits, it allowed for steady redemption of preference shares. These redemptions did not constitute income or capital gains, as they were repayments of share capital.
Mark and Emma could now realise value from the company at a sustainable pace, without personal sales, income tax exposure or share dilution.
“We weren’t rushing to exit. We just wanted to make future decisions from a position of strength.”
Although their son James was not involved in the business at the time of planning, Mark and Emma wanted a structure that gave them the option to include him in future.
The freezer shares and discretionary trust gave them the flexibility to involve James later, without committing to any action now. If he chose to participate, the structure was already in place. If not, the business could continue under professional management or be wound down over time.
There was no pressure to hand anything over. Just a framework that respected the future as much as the present.
Mark and Emma also addressed their long-term estate planning during the restructure.
They arranged a Whole of Life insurance policy, written in trust and designed to provide liquidity to their estate for Inheritance Tax purposes. The policy was structured outside of probate and would provide funds at the time of death to cover expected liabilities.
The value of the policy was set to match their estimated IHT exposure, giving their family time and flexibility rather than a forced decision to sell or refinance.
Alongside this, they updated their wills, registered their powers of attorney, and finalised all company governance documents to ensure continuity and clarity.
The result of the restructure was not a handover or exit. It was a modernisation.
Mark and Emma retained full control. The company structure supported their future lifestyle. The share classes gave them tools to release value gradually, and the trust created a clean pathway for future planning.
The company could now continue, wind down, or evolve. It was structured entirely around their terms and their timing.
“We didn’t need to solve a problem. We just wanted to build something that gave us options.”
Mark and Emma’s restructure was shaped through consultation with Property118. The planning was designed to reflect the real business they had built and to support the way they wanted to live.
The solution was built from first principles, with tax, legal and finance integrated into one coordinated plan. Every element of the structure, from incorporation to novation to insurance, was implemented with clarity, compliance and long-term resilience in mind.
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Member Since June 2018 - Comments: 10
19:52 PM, 30th August 2025, About 5 months ago
In reality, this structure does not work if you still need lending or a remortgage to release more capital. Virtually no lenders will touch shareholders with growth shares held in trust. The minute you mention there is trust in the shareholding, you are unlikely to get a mortgage.