Probate and Business Assets UK: A Practical Guide

Overview

Probate is the formal legal process of dealing with someone's estate after they die. In England and Wales, the personal representatives (executors named in a will, or administrators where there is no will) apply to the Probate Registry for a grant, which gives them authority to collect in the deceased's assets, settle any liabilities, pay tax due to HMRC and pass what remains to the beneficiaries.

Where the estate includes business interests, the same legal framework applies but the practical work is usually heavier. Business assets can include shares in a limited company, a partnership interest, trading stock, commercial premises, goodwill, plant and equipment, intellectual property, and money owed by customers.

Each of these needs to be identified, valued as at the date of death, and dealt with appropriately. The valuation feeds directly into the inheritance tax position, and certain business assets may qualify for Business Relief, which can reduce the taxable value. Because of this, executors handling a business estate often need to move quickly and keep careful records.

Key steps

1. Identify the business structure and ownership. Start by establishing exactly what the deceased owned. Was the business a sole trader operation, a partnership, or a limited company? Check for shareholders' agreements, partnership deeds and company articles, as these often contain provisions dealing with what happens on death. The structure drives almost every decision that follows.
2. Value the business interests as at the date of death. You will need a realistic valuation of the deceased's share for inheritance tax and estate accounts. This can involve a formal business valuation by an accountant, particularly for limited companies or trading partnerships. Trading stock, equipment, goodwill and any premises should all be considered. Keep supporting evidence for HMRC.
3. Decide how the business will be run during probate. Trading cannot simply pause while you wait for the grant. If there are co-owners or surviving directors, they may continue operations. For a sole trader, executors need to consider whether to keep trading temporarily, wind down, or arrange a sale. Insurance, employees and suppliers all need attention quickly.
4. Apply for the grant and deal with inheritance tax. Submit the appropriate inheritance tax account to HMRC and apply to the Probate Registry for the grant of representation. Where Business Relief may apply, claim it carefully and keep the evidence. Tax on some business assets can be paid by instalments, which is worth considering where cash flow is tight.
5. Transfer or dispose of the business assets. Once the grant is issued, executors can formally transfer shares to beneficiaries, sell the business, distribute partnership proceeds, or wind the operation down. Company registers must be updated, HMRC and Companies House notified where relevant, and any final accounts prepared. Only then can the estate be closed.

Common questions