Can we tell a client how much cash the company should keep?

Yes, and you are the right person to do it. Sizing a working capital buffer is accountancy work: a quarter's overheads, the VAT and corporation tax reserves, committed capital expenditure, the headroom a lender requires under a covenant. None of that is a regulated activity, and nobody is better placed to put a number on it than the firm that prepares the accounts. What changes character is the next question. Once the conversation moves from how much the business needs to what the surplus should do — a deposit, an investment, an employer pension contribution — it becomes regulated advice, and it belongs to a firm authorised to give it.

How much cash is too much for business property relief?

There is no statutory figure, which is precisely why the question gets left alone. Section 112 of the Inheritance Tax Act 1984 excludes any asset that was neither used wholly or mainly for the business over the previous two years nor required at the time of transfer for its future use. In Barclays Bank Trust Co Ltd v IRC, decided in 1998, a company held around £450,000 in cash; roughly £150,000 was accepted as required by the business, and the remaining £300,000 was treated as an excepted asset. The test is need and documented future purpose rather than a percentage, so the defence is contemporaneous evidence rather than a ratio.

Does surplus cash put Business Asset Disposal Relief at risk?

It can, because the relief requires the company to be a trading company — one carrying on trading activities without substantial non-trading activities. HMRC's guidance has long read substantial as broadly 20% of the relevant measures, although the Upper Tribunal in Allam v HMRC in 2021 declined to treat that percentage as the governing test. Cash alone rarely fails a company on its own, but cash sitting alongside an investment property, a share portfolio or a loan to a connected company is how the total quietly accumulates. With the relief rate now 18% on qualifying gains from 6 April 2026, the cost of failing the test has risen.

Our client is keeping it for a possible acquisition. Does that protect it?

Not on its own. That was very nearly the argument the executors ran in Barclays Bank Trust Co Ltd v IRC: the cash was held as a contingency in case an appropriate business opportunity arose. It did not save the £300,000. A general intention to be ready for something is not the same as an asset being required for the future use of the business, and the distinction turns on evidence created at the time rather than an explanation offered afterwards. Board minutes naming a target, a heads of terms, a quotation for plant, a lender's term sheet — those are the things that turn an intention into a documented purpose.

Is raising this the same as recommending an investment?

No, provided you stop where the regulated work starts. Observing that £440,000 appears to exceed what the business needs, that it currently attracts no relief on death, and that nobody has taken a decision about it, is professional judgement about a client's balance sheet. Naming a product, a provider, a fund or a contribution figure is not, and an accountancy practice without the relevant FCA permissions cannot do it. The clean version of the conversation is to state what you can see, ask whether anyone has looked at it, and with the client's consent introduce someone who is authorised to. Equity & General, FCA number 474163, does the regulated half.

You signed a personal guarantee. What happens to your family?

What you actually signed

When a company borrows, the lender usually wants more than the company’s promise to repay. A personal guarantee is your undertaking, as an individual, to cover the debt if the company cannot.

That moves the risk off the company’s balance sheet and onto your own. It typically survives you selling your shares, and in most cases it survives you.

The part most owners have not thought about

The guarantee does not disappear if something happens to you. If the company runs into difficulty afterwards, the lender can look to your estate, which means to your family.

So the question is not really whether the business would survive. It is whether, in the worst version of the next few years, your family ends up with a debt attached to a company they do not run.

It is on the public record

Charges registered against a company appear at Companies House, with the date and the lender. If you are not sure what your company has given, that register is the place to look, and your accountant can read it with you.

Registered charges and personal guarantees are not the same thing, but where there is one there is very often the other.

Where to find out what you have signed

Most owners are vague about the detail, which is understandable — it was signed at the point of getting the money, and nobody reads it afterwards.

Companies House. Charges registered against the company are public, with the date and the lender. Your accountant can pull this in a minute.
The facility letter. The guarantee is usually a separate document referenced in it.
The lender. They will tell you what is outstanding under the guarantee if you ask.

A registered charge and a personal guarantee are not the same thing. But where there is one, there is very often the other, and the register is the easiest place to start.

Guarantees that outlive the reason for them

Guarantees are often still in place long after the circumstances that produced them have gone.

The facility was repaid, but the guarantee was never formally released.
The original borrowing was refinanced and a new guarantee signed, while the old one remained.
A director resigned or sold their shares and assumed the guarantee went with them. It usually does not, unless the lender agrees to release it in writing.
A landlord holds a personal guarantee on a lease, which people rarely think of as borrowing at all.

It is worth asking, once, what is still outstanding in your name. Releases do not happen automatically.

The questions worth asking

What exactly is guaranteed, and up to what amount?
Is it capped, or is it unlimited?
Does it cover only the current facility, or anything the company borrows in future?
Is there a second guarantor, and does the lender have to pursue them too?
If something happened to you, where would the money come from?

The last one is the one that tends to change the conversation, because in most cases the honest answer is that nobody has thought about it.

Questions owners ask

Does my spouse have to sign too? Lenders often ask, particularly where the family home is involved. It is worth understanding what that means before signing rather than after.
Is the guarantee capped? Sometimes. Sometimes it is unlimited, and sometimes it covers future borrowing as well as the current facility. These are different situations.
Will life cover deal with it? Cover can be arranged so money is available at the point it would be needed, but how it is set up matters, and that is a regulated advice question.
Does it end when I retire? Not unless the lender releases it in writing.

What to do next

Ask your accountant to check what is registered against the company and to talk you through what you have signed. That costs nothing and takes them minutes.

If the answer to the last question above is that the money would have to come from your family, that is a planning question rather than an accounting one, and it is worth getting somebody qualified to look at it.

This article explains how the rules work. It is not advice about what you should do, and it does not take your own circumstances into account. Your accountant is the right place to start, and they can introduce you to a regulated adviser if the answer needs one.

You signed a personal guarantee