Case Studies

The Situation

We were approached by a couple of grandparents who were looking to help their children fund school fees payments for the grandchildren.
The couple who approached us owned two separate businesses. After talking with them, we established that their son and his wife both worked within the businesses and were paid salaries through PAYE.

The Client's Objectives

The son and his wife have three children, two of whom are in private education. They were looking at ways of helping become more tax efficient and the grandparents were keen on assisting with funding of the school fees in whatever way they could.

"We were sending Aidan & Calum to school at a cost of £38,000 per annum. This service has enabled us to reduce our school fees burden by £18,000 every year"
Mr & Mrs S, London

Measures for Success

The clients’ measures for success where simple:

  • A reduction in their overall tax burden
  • A reduction in the amount that the parents had to pay towards their children’s education
  • Long-term inheritance tax savings
"We didn’t want to do anything aggressive with our tax situation. This service fit the bill & meant that we didn’t have the same anxiety levels every time the school fees bill came through the letterbox”
Mr & Mrs A, Stow

Our Solution

From talking with them, and after discussing asset protection and inheritance tax planning, it was agreed that the following be done:
  1. We would form a group structure, as although the two businesses were separate, they share resources and facilities including premises
  2. We therefore formed a new holding company (Newco) and brought the two separate businesses in as two new 100% owned subsidiaries by way of a share for share exchange
  3. The grandparents then owned Newco 50:50 in the same way that they had previously owned the two separate trading entities.
  4. We created a new share class, having rights to capital insofar as they would only accrue value after their creation
  5. The grandparents gifted shares to the son and daughter in law, giving them a direct equity stake in Newco
  6. The grandparents then formed a Family Trust and settled some of the newly created shares into it.

The Value to the Client

A. We established a Group in order to provide a platform for asset protection for the shareholders and an environment whereby results of the trading entities would remain separate but held in one legal structure
B. We gave the company the option to now partially remunerate the son and daughter in law by way of dividend, as they are now part owners in the company
C. We started the grandparents on the road to an effective succession and transition of management/ownership to the next generation
D. We helped to establish a Trust for the grandchildren, which, in future, may provide a dividend income for the grandchildren directly