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The mission statement of the Family Business Network Ireland is tellingly appropriate for challenging times: ‘By families, for families, across generations.’
As the network organisation for experiential learning, mutual support and advocacy for and on behalf of Irish families in business, FBN exists to connect people who share an interest and concern for the growth and sustainability of this key economic sector.
In its role as a voice for this community, and acting as an advocate to represent a wide range of Irish family businesses, the FBN’s position at the coalface enables it witness the formidable challenges currently confronting family concerns.
“These are certainly challenging times, but family businesses know better than most that there will always be challenges,” says John McGrane, executive director, The Family Business Network in Ireland.
“Many family firms already have many stories of overcoming adversity and they always find a way to rise to the challenge, already having survived for generations to get to this point.”
Irish family businesses are inherently long-term focussed, planning for generations, not just financial quarters.
“They are incredibly resilient, and can use their flexibility — or lack of bureaucracy — to their advantage, enabling them to make decisions quickly in challenging times. Undoubtedly, we believe there is a gap in the recognition of this in government policy, and we do continue to campaign for family businesses to be giver their due credit for their unique contribution to communities in every constituency across Ireland.”
The financial fallout from Covid-19 is still impacting the family sector, a situation that has been further exacerbated by the war in Ukraine.
“That is absolutely the case. The recent years of the pandemic and the Ukraine war have been unprecedented and have caused turmoil across not only the business community but society as a whole,” he said.
He underlines the increases in the cost of doing business, a result of the fallout, have been a cause of huge pressure in the family business sector and which have been insurmountable for some.
“The Family Business Network welcomes the introduction of schemes such as the Temporary Business Energy Support Scheme (TBESS) by government and we continue to liaise with policymakers on ensuring that these business relief schemes are fit for purpose and that they are made accessible to all those that need to avail of them.”
Given the close-knit nature of most family enterprises, they do suffer more stress than other companies, John agrees. “Of course, some family businesses face the additional stress of succession planning, which no other enterprise has to go through.
“Succession is more than making a plan, it is an emotional process, and it can be a difficult thing to confront. Moreover, when succession does take place in a family business, it is subject to taxation, unlike any other company which undergoes a change in management structure.
“As such, a well-planned succession, far in advance of any handover, can save a lot of stress for family businesses. Plus, it is clear that all family businesses take such personal pride in what they do, that it more than offsets any stress.”
Family Business Network Ireland was established by a number of Ireland’s leading business families. As the Irish chapter of a non-profit international network of business-owning families — Family Business Network International — it is tasked with promoting the success and sustainability of family business.
The FBN International has in excess of 10,000 members from over 3,700 family companies, organised in 29 national or regional associations around the world.
Commenting on Budget 2023, John McGrane said the limiting of EU supports to manufacturers and exporters severely penalises the other employers on which they depend in every community, such as retail, waste and other key local services.
“Ireland is too reliant on tax revenue from just a few foreign firms, in just a few sectors and locations, and action needs to be taken if the Government wants to protect and develop our home-grown employers. Budget 2023 is a missed opportunity to begin rebalancing the economy and put these firms, who account for four times the Net National Product of their FDI counterparts, at the heart of economic planning and we urgently need a new long-term strategy for local employers and jobs.”
As to how government can best support the family business sector into the future, he would urge a recognition of its unique position and nationwide contribution.
Looking to the future, John McGrane sees Irish family businesses facing the same issues that most companies will be facing, in areas such as talent and managing costs.
“However, the issue of succession is one that is unique to family business and as such is an area that support is difficult to come by. This provides a distinct challenge for family-run businesses and that is where the Family Business Network aims to be a resource, connecting family businesses across Ireland with each other to provide a network of knowledge and mutual support to one another.”
The Family Business Network has also continuously urged the Government to update the tax system to remove the obstacles faced in family business succession planning and transition. Ireland’s current rate of CGT is the third highest in the OECD and leaves Irish family-run businesses at a distinct disadvantage to their peers.
Organising who will take over your business is one of the most significant decisions you will ever make, explains Camilla Cullinane, tax partner, KPMG Dublin.
“That is why it makes sense to start thinking about this early, ensure a detailed plan is in place, and never leave things to chance,” she said. “A successful succession plan protects your business, can be an opportunity to strengthen your business and put it on an even firmer footing for the future. It can offer an excellent chance to consider the company’s operations and direction and involve younger family members in decision-making, so everyone is working towards shared goals.”
Balancing family and business interests is important when considering how to finance succession planning, she advises.
“While the long-term future of your family’s wealth and business are closely entwined, there may also be conflicting interests, particularly if some family members don’t work in the company. Therefore, it’s essential to define who is family, who will benefit and what provisions are made for family members who are not active in the business.”
Many families find it helpful to have a family governance plan that defines how the family and the business interact. This plan can address how the family wants to operate the business and who is involved regarding ownership and management.
“Tax is critical in succession planning, so you need to know the tax landscape when drawing up your succession plan. This includes being aware of the potential impact of Capital Gains Tax (CGT), Capital Acquisitions Tax (CAT) and any relevant tax reliefs, such as Retirement Relief from CGT, which business owners depending on their age, can avail of to varying degrees when transferring a business to either a child or someone outside of the family or Business Relief, which reduces the taxable value of business property by 90% for CAT purposes,” said
Camilla.
“Expert advice is invaluable as many conditions must be met to avail of these reliefs and manage these liabilities. If passing on your business will incur a tax liability, you’ll also need to consider ahead of time how this tax liability will be funded. For example, a lot of wealth may be tied up within your business, making it difficult for those liable to access the funds they need to pay the tax liabilities. You’ll also need to be crystal clear on any tax implications relating to assets held in other jurisdictions. Make sure you get local tax advice to avoid any shock bills down the road.”
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