Other Strategies BPR, AIM And Insurance
Business Property Relief (BPR) Qualifying Investments
Government encourages investment into smaller enterprises by granting investors tax incentives. One of the key benefits is that qualifying holdings may qualify for Business Property Relief (BPR) which grants freedom from Inheritance Tax on such assets. EIS investments (see elsewhere on site) qualify for Business Property Relief (BPR) but more diversified solutions have also developed to allow those without a personal business interest to invest into a broad portfolio of company shares that will be IHT free. Most invest in companies quoted on London’s AIM (Alternative Investment Market) and over 3000 companies have joined AIM since it’s foundation.
What Are The Key Benefits?
Most investors’ primary aspiration will be to pass on as much money of the money they have already accumulated as possible to their families without Inheritance Tax. The investment manager will often focus on achieving capital growth but will also concentrate on capital preservation. Therefore, there will be a focus on established AIM businesses with some being household names such as Majestic Wines. AIM companies are not usually micro-enterprises and some have a capitalisation of over a billion pounds.
What Happens If The Investor Dies Before The Investment Has Been Held For Two Years?
Some clients may wish to retain control of their assets but provide for the Inheritance Tax liability when they die. This can be easily achieved by arranging a whole life assurance that will pay an amount equivalent to the anticipated Inheritance Tax liability that will arise, usually when the second person eventually dies with a married couple.
The sum assured should not be taxable provided the policy is established under trust.
Premiums may often be cheaper than anticipated as the policy only pays out when both partners have died. As independent financial advisers we can guide you towards appropriate policies sourced from across the market place.
We have many years’ experience of providing independent financial advice regarding Inheritance Tax for people in Brighton, Hove, Sussex, Reading, London and the South East. If you would like a no obligation chat about the choices available to you, contact us now.
Government encourages investment into smaller enterprises by granting investors tax incentives. One of the key benefits is that qualifying holdings may qualify for Business Property Relief (BPR) which grants freedom from Inheritance Tax on such assets. EIS investments (see elsewhere on site) qualify for Business Property Relief (BPR) but more diversified solutions have also developed to allow those without a personal business interest to invest into a broad portfolio of company shares that will be IHT free. Most invest in companies quoted on London’s AIM (Alternative Investment Market) and over 3000 companies have joined AIM since it’s foundation.
What Are The Key Benefits?
- Shares in AIM companies that have been held for more than two years at the date of death provide exemption from Inheritance Tax. Most other avoidance measures typically involve making a gift to family or a trust and will not become fully effective for Inheritance Tax avoidance for seven years.
- The investments are not gifted away. This means that the investor can still have access to the funds during their lifetime and maintains full control. Thus, if the investor requires income or additional cash in the future for care costs etc it can be accessed
- Complicated trusts are avoided.
- The investment will be professionally managed and spread amongst a portfolio of smaller usually UK companies. This sector has delivered strong growth in recent years.
- Some portfolios may also provide some dividend income.
- There is no maximum age limit and the minimum amount that you may invest is from £20,000 depending on the provider.
- The investment manager will seek to invest your money in a portfolio of qualifying AIM shares as soon as possible so that the two year period elapses at the earliest opportunity. In the meantime, your money will be held on deposit and will attract interest.
- The investment managers will spread your investment amongst a range of AIM shares to reduce the volatility and risk attached to your investment.
- There is no minimum holding period although for Inheritance Tax avoidance purposes the investment must be held for two years.
Most investors’ primary aspiration will be to pass on as much money of the money they have already accumulated as possible to their families without Inheritance Tax. The investment manager will often focus on achieving capital growth but will also concentrate on capital preservation. Therefore, there will be a focus on established AIM businesses with some being household names such as Majestic Wines. AIM companies are not usually micro-enterprises and some have a capitalisation of over a billion pounds.
What Happens If The Investor Dies Before The Investment Has Been Held For Two Years?
- Usually no Inheritance Tax will be payable if the investments are left to a surviving spouse and they will be regarded as having acquired the investments at the same time as the original investor.
- If the shares are not left to a spouse the asset may be liable to Inheritance Tax at the full rate.
- No Capital Gains Tax is payable on AIM shares held at the date of death.
Some clients may wish to retain control of their assets but provide for the Inheritance Tax liability when they die. This can be easily achieved by arranging a whole life assurance that will pay an amount equivalent to the anticipated Inheritance Tax liability that will arise, usually when the second person eventually dies with a married couple.
The sum assured should not be taxable provided the policy is established under trust.
Premiums may often be cheaper than anticipated as the policy only pays out when both partners have died. As independent financial advisers we can guide you towards appropriate policies sourced from across the market place.
We have many years’ experience of providing independent financial advice regarding Inheritance Tax for people in Brighton, Hove, Sussex, Reading, London and the South East. If you would like a no obligation chat about the choices available to you, contact us now.