Protecting your clients’ assets
Our Inheritance Tax Portfolio service helps a client pass on more of their wealth by investing in Business Relief qualifying companies quoted on the Alternative Investment Market (AIM).
Business Relief qualifying assets that are held for a minimum of two years are exempt from Inheritance Tax (if still held upon death).
How the service works
Inheritance Tax (IHT) is currently levied at 40% of the value of the client’s estate above the nil rate threshold – £325,000 for an individual and £650,000 for a married couple (or civil partnership)*. One way to minimise their potential tax liability is to own an investment portfolio of shares in IHT exempt smaller companies for two years or more upon death.
Investing on AIM (the London Stock Exchange Alternative Investment Market) carries greater levels of risk than investing on the FTSE100. We therefore follow a clearly defined investment process; identifying high quality growth companies on valuations that we deem to be attractive.
We engage with those AIM listed companies and HMRC to determine their exact IHT status. Although we select investments with a view to holding them for a minimum of two years, the portfolio composition does not have to remain static. Consequently, if a holding in a qualifying company is sold after six months, those six months count towards the two year IHT tax exempt qualifying period provided funds are reinvested into another qualifying company.
To minimise the burden associated with monitoring and administering the investments, our Inheritance Tax Portfolio Service is offered on a discretionary management basis, thereby providing specialist investment management as well as the range of usual benefits associated with our standard discretionary service.
*Correct as at 30 June 2017
Understanding the risks
Like all investments, it is possible that shares could fall in value as well as rise. Other risks to consider are;
Investments carry varying degrees of risk which means the client may get back less than they originally invested when they come to sell their investments.
Tax treatment is dependent upon the client’s personal circumstances and tax rules may change in the future meaning tax relief cannot be guaranteed.
Tax relief is subject to the AIM companies we invest the client’s money into maintaining their qualifying status.
AIM shares are likely to be more volatile than shares in the London Stock Exchange FTSE 100.
An AIM Portfolio may be suitable if;
A client is prepared to invest in higher risk shares and accept a high degree of volatility in their investments.
They are seeking an IHT mitigation scheme that can be effective after as little as two years.
On their death, the value of their estate (everything they possess and own outright) exceeds the £325,000 personal allowance (the upper limit for IHT nil rate band from April 2012 (the personal allowance)). This has been frozen until the 2020/21 tax year. Please note that this does not include the potential use of the residential nil rate band.
A client does not want to lose control of, or access to, their capital.
They are seeking a straightforward, transparent, less expensive IHT mitigation scheme where there is no need to establish complex, opaque and costly legal arrangements.