BUSINESS RELIEF
Industry Update - November 2022
1. INTRODUCTION
The latest news, updates and statistics on BR
2. Market Update
3. Considerations for Investment
4. Industry Analysis
5. Managers in Focus
6. What's on the Horizon
7. Further Learning
find inside
Accredited by:
In partnership with:
business relief
Industry Update
April 2022
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
Opening Statement Acknowledgements and Thanks Key Findings
1. Introduction
Market Composition MICAP Market Snapshot
3. Considerations For Investment
Inheritance tax—What the numbers say Money trees: the compelling BR-forestry opportunity Why it pays to take a closer look at client wills Considerations for Business Owners The Challenges of Wealth Transfer
Mini-Budget 2022: lower stamp duty could push up house prices. BR lending in a volatile market “Are tax reliefs good value for money?” MPs want to know What the managers say
2. market update
Blackfinch TIME Investments Zenzic Capital Comparison Table
5. managers in focus
Inheritance tax and farmland in environmental agreements What the Managers Say
6. what's on the horizon
Learning Objectives CPD and Feedback About Intelligent Partnership Disclaimer
7. further learning
Beringea Blackfinch Octopus TIME Investments Zenzic Capital Comparison Table
Powers of attorney and wording re discretionary investments (SFE) Russia-Ukraine: BR on AIM in times of crisis Rise of the inheritance economy The renewable energy opportunity for growth and income Considerations for Business Owners What the managers say
Market Composition Fees and Charges MICAP Market Snapshot Case study: Transfers benefitting from relaxation of the two-year holding periodt
IHT: no longer a tax for the super-wealthy Government streamlines IHT reporting requirements
Frozen until 2026: IHT allowances What the managers say
scroll down
Business Relief: the stars are aligned
Photography by Interview by
03
mid the market turbulence, a convergence of forces has thrust Business Relief (BR) to the fore, highlighting its role as a powerful form of tax relief that shouldn’t be ignored. Inheritance tax (IHT) is on the rise. Total HMRC receipts for April 2022 to July 2022 were £252.6 million, which is £26.7 million higher than in the same period a year earlier. Inflation is soaring. Consumer price inflation hit a 40-year high of 10.1% in July. Forecasters at Citigroup said last month that inflation could shoot past 18% at the start of next year, and Goldman Sachs thinks it could even hit 22% if gas prices don’t fall soon. House prices continue to soar, delivering their biggest annual jump in nineteen years. UK house prices grew 15.5% to £292,000 in the year to July, according to official figures – the highest annual inflation rate since 2003. Despite much speculation that increasing mortgage rates will cause a crash in the housing market, the latest statistics from the Halifax House Price Index show that house prices in September 2022 were 9.9% higher than the same month a year earlier. Meanwhile, the standard nil-rate band has been frozen at its current level of £325,000 since 2008/09. It was due for a review in 2021; however, along with a number of other allowances and thresholds, it is to remain at this level up to and including the tax year ending 5 April 2026. The freezing of both the nil-rate band and the residence nil rate band taper (now set at a maximum of £175,000) available for IHT for the next four years effectively means that more people will pay IHT, as the value of estates increase as a result of inflationary pressures. Discounting estate value Given this tumultuous environment fraught with uncertainty, there has probably never been a greater need for families to implement sound IHT strategies. Enter Business Relief, a well-established estate planning tool which can enable investors to gain IHT relief quickly without a loss of control over their investment. Some diversified assets may qualify for BR, which can also help to reduce portfolio risk. Any ownership of a business, or share of a business, is included in the estate for IHT purposes. BR works simply by reducing the IHT applicable to a business or qualifying shares. YYou can get business relief of either 50% or 100% on some of an estate’s business assets or shares, which can be passed on either while the owner is still alive or as part of their will. No better time than this BR has come a long way since it was first introduced in the 1976 Finance Act. Initially a lifeline for family-owned businesses upon the death of the owner, the scheme is now an incentive for people to invest in trading businesses regardless of whether they run the business themselves. 'For close to half a century, BR has saved countless businesses and estates from the ravages of IHT—using shares in unquoted qualifying companies; shares in qualifying companies listed on the Alternative Investment Market (AIM) and some similar exchanges; and unincorporated qualifying trading businesses, such as partnerships. Without BR, it’s difficult to judge just how many thousands of otherwise sound UK businesses would have been damaged by the need to sell off all or part of them in order to raise funding to pay IHT bills. Looking over the lifespan of BR, it would be difficult to find a moment when conditions were more optimal for a purposeful BR investment and when the UK-based companies that benefit from it were more in need of funding than in the present. The advent of Liz Truss' government and its mini-budget has only stoked the fires of uncertainty and raised the stakes for those who don't take decisive planning action sooner rather than later.
A
- Name Surname
Looking over the lifespan of BR, it would be difficult to find a moment when conditions were more optimal for a purposeful BR investment and when the UK-based companies that benefit from it were more in need of funding than in the present.
Guy Tolhurst
Managing director Intelligent Partnership
BR lending in a volatile market “Are tax reliefs good value for money?” MPs want to know The Challenges of Wealth Transfer What the managers say
Inheritance tax—What the numbers say Money trees: the compelling BR-forestry opportunity Why it pays to take a closer look at client wills
Inheritance tax and farmland in environmental agreements What’s driving Business Relief? What the Managers Say
Business Relief (BR) is the topic of the moment
This report and the research behind it would not have been possible without the help and support of a number of third parties who enthusiastically shared their time and expertise. These busy professionals went to great lengths to provide us with data, their insights on the market, and useful comments and suggestions while peer reviewing initial drafts. We thank Jeremy Moody, secretary and adviser at the Central Association for Agricultural Valuers (CAAV), who was kind enough to provide us with an insightful thought leadership article. We’d like to also show our gratitude to Dominique Butters of Blackfinch Investments; Henny Dovland and Simon Housden of TIME Investments; and Daryl Thorpe of Zenzic Capital for providing valuable content for this report. The expertise of one and all have improved this study in innumerable ways and their support as sponsors has made this update possible. Any errors and omission are our own. We have relied upon MICAP for most of the data that we have based the update upon. MICAP is part of the same group of companies as Intelligent Partnership. We also carried out our own extensive desk research and interviews to verify their data. The update is made possible by our sponsors, who have contributed copy to the update and supported us by helping to meet production costs. So, a big thanks to Blackfinch, TIME, and Zenzic.
Acknowledgements and thanks
learning objectives for cpd accreditation
Identify the main developments and news in the Business Relief market Describe how Business Relief sits within the current IHT landscape Evaluate the key fees and charges applied by Business Relief managers Recognise the various factors that will affect the Business Relief market in the coming months Analyse the latest Business Relief-related data and statistics Benchmark current products and providers against each other on key investment criteria
✓ ✓ ✓ ✓ ✓ ✓
cpd
After you have reviewed this publication and before we fulfill your CPD certification request, we will be requesting your feedback on it. Your collaboration will assist us to enhance the learning activity, and will inform improvements to future publications.
04
Find out more at Managers in focus
Readers can claim up to 2 hours’ structured CPD. By the end of the update readers will be able to:
Source: Office for National statistics
Contact us: lisa@intelligent-partnership.com Sponsorship Opportunities: chris@intelligent-partnership.com
EDITORIAL Mohamed Dabo CREATIVE Gillian Livingstone SUB-EDITING Lisa Best & Mohamed Dabo RESEARCH Mohamed Dabo
MARKETING Chloe Fry Carlo Nassetti DISTRIBUTION Michelle Powell SALES Chris White
Mini-Budget 2022: lower stamp duty could push up house prices. BR lending in a volatile market “Are tax reliefs good value for money?” MPs want to know The Challenges of Wealth Transfer What the managers say
MARKETING Carlo Nassetti DISTRIBUTION Michelle Powell SALES Chris White
Key findings
05
overall tax liability of taxpaying male-owned estates in 2019 to 2020.
£2.36 billion
overall tax liability of taxpaying female-owned estates in 2019 to 2020
£2.6 billion
total tax liability accounted for by net estates valued at less than £1 million in 2019 to 2020
900m
number of estates that used the RNRB threshold in 2019 to 2020
proportion of UK deaths (or 23,000) that resulted in an Inheritance Tax (IHT) charge in 2019 to 2020 (0.02 percentage points higher than the previous tax year)
3.76%
IHT receipts received by HMRC during the financial year 2021 to 2022 (an increase of 14% over the previous year)
£6.1 billion
BR relief set against assets and used by 2,820 estates in 2020 to 2021
£1.9 billion
£2.8 billion
the combined value of agricultural and business property relief (APR, BPR) set against assets in 2019 to 2020
This update has thrown up some interesting, sometimes alarming, sometimes revealing facts and figures. So we've selected a few to give you a flavour of the current context, some food for thought and some indicators of the fundamentals you should be aware of.
19,200
£
key findings
Mental capacity issues and investments under discretionary management Russia-Ukraine: BR on AIM in times of crisis Rise of the inheritance economy The renewable energy opportunity for growth and income Considerations for Business Owners What the managers say
Business Relief stands strong amid the political storm BR lending in a volatile market “Are tax reliefs good value for money?” MPs want to know What the managers say
Business Relief stands strong amid the political storm
07
1.300.00
1.200.00
1.100.00
1.000.00
900.00
1.056.81
May 21
Jun 21
Jul 21
Aug 21
Sep 21
Oct 21
Nov 21
Dec 21
Jan 22
Feb 22
Mar 22
Apr 22
1 day
In February, the Treasury’s inheritance tax revenues increased by £700m since last April – making it a record high.
Jessica Franks, Head of Retail Investment Products, Octopus Investments
- MARCUS STUTTARD
In times of heightened market risk and volatility, understanding history can help to maintain perspective.
It’s been a turbulent few weeks in UK politics, during which multiple changes in prime minister and chancellor left little clarity on the policy direction of the UK’s leadership. It has lurched from growth to warnings of huge cuts and tax hikes, with yet another budget event - the Medium Term Fiscal Plan - due to take place shortly from the time of publication. In the midst of all this, there has been no specific mention of Business Relief. In Mr Kwarteng’s initial Mini-Budget 2022 on 23 September. His Growth Plan, looking for turbo-charged economic growth, did make reference to changes to three other well-established tax-advantaged government schemes - the Seed Enterprise Investment Scheme, Enterprise Investment Scheme and Venture Capital Trusts. All of these are intended to encourage investment into UK start-ups and young SMEs as a way to fund home-grown businesses. BR can play an influential part in this agenda and has proved a particularly useful mechanism for developing renewable energy solutions with the incentive of IHT tax relief. But its originally envisaged purpose of providing protection to family businesses endangered by large IHT bills on the death of founders remains hugely important, given that they account for more than half of all private sector jobs as well as around 44% of private sector turnover. This summer, Institute of Family Business Chief Executive Neil Davy described the ongoing relevance of this sector, saying, “You genuinely put people first; you take risks and innovate, but you also take a long-term view.” He went on, “Family-owned companies should be recognised as an example of responsible, sustainable business – and now, more than ever, there is the opportunity and need for the voice and the model of family businesses to take centre stage.” The move of the Rishi Sunak government towards consolidation and more traditional economic policies perhaps signals an environment in which a scheme such as BR is valued even more greatly; it combines protection of an important sector of UK companies with support for non-family business companies through both private investment and the AIM market. That support can both drive growth and bolster more established firms in the UK. When it comes to BR, any changes that impact companies are of interest. Any help or hindrance to them may well be reflected in the levels of success or failure of BR investee companies. Among those that still appear to be on the cards are help with energy costs, a currently soaring expense to many firms and the cut to National Insurance. The latter will also make it cheaper for businesses to employ more staff being worth an average of £9,600 for over 900,000 businesses, according to the Treasury. In fact, Boris Johnson’s National Insurance tax hike of 1.25% introduced to help fund the NHS and social care has already been scrapped (effective 6 November 2022.) The reversal of the Health and Social Care Levy leaves potential changes to the current care system in doubt. According to the government, the NIC raise, along with increased dividend tax was expected to raise approximately £13 billion a year to fund health and social care. With no details on alternative funding and what this will mean for changes to the care system, such as capping the care costs of individuals, the value of BR as an estate planning method that allows investors to retain access to their funds continues to be attractive. With no certainty about what financial assets individuals may need to have in place to pay for their later life health needs, BR remains a useful option to the right clients. Another measure that has survived the multiple Autumn budget events of 2022 is the cut in stamp duty. From 23 September 2022, the threshold above which Stamp Duty Land Tax (SDLT) must be paid on the purchase of residential properties in England and Northern Ireland increased from £125,000 to £250,000. Property is the most valuable asset in most people’s estates and the value assigned to it can have a great impact on their net worth calculation. At the same time, average UK house prices hit a record £296,000 in August 2022, £36,000 higher than the same month a year earlier, according to figures from the Office for National Statistics (ONS).The ONS said house prices grew by 13.6% over the year to August, down from a peak of 16% a month earlier and UK home sellers boosted the prices they’re asking for their properties at the strongest pace in four months, the property listing website Rightmove said in September. On the other side of the coin, there is growing evidence that rapidly rising mortgage rates, driven by Bank of England base rate increases aimed at dampening inflation, could put the brakes on the property market. Nevertheless, question marks remain over how high mortgage lenders interest rates will climb and an ongoing shortage of stock has historically helped to keep asking prices up. Houses being the largest assets in most estates, their soaring prices have fuelled inheritance tax in recent years, underscoring the importance of BR as a powerful inheritance tax (IHT) relief. What’s more, the nil rate band, below which no inheritance tax is paid, has been £325,000 since 2009, and isn’t due to be reviewed until 2026 at the earliest. At the time of publication, predictions for the Medium Term Fiscal Plan, due to take place on 17 November, included the extension of the frozen nil rate bands generating a stealth rise in IHT receipts and all sorts of other possibilities for tax rises. Mr Sunak and Mr Hunt were full of warnings about the necessity of filling the treasury’s big, black, fiscal hole. In that context, it seems only sensible that advisers are fully cognisant of all the legitimate tax planning tools at their disposal, with Business Relief ticking many boxes for the right clients.
"Family-owned companies should be recognised as an example of responsible, sustainable business"
BR lending in a volatile market
While high inflation, rising interest rates, and now a looming recession, have impacted the loans market negatively, BR managers who are engaged in lending activities as part of the underlying BR trade of the companies that their investors buy into are able to use a variety of strategies to face up to the resulting volatility.
08
More than 80% of the unlisted BR offers that are currently open (30 in total) have some sort of lending trade. The remaining offers (only 5) do not have a lending strategy. As the Bank of England forecast that the economy will begin to shrink in the last quarter of the year, and continue contracting until the end of 2023, BR managers are bolstering their defences against the gathering market storm. As economic growth slows, credit risk is expected to increase further. As noted in a recent release from the Association of Investment Companies (AIC), floating rate bonds and loans could be a good investment in the current inflationary environment. This is because the income from these instruments is linked to benchmarks that move in line with central bank interest rates, which the market expects to rise over the next twelve months. These loans may also offer a complexity or illiquidity premium, which means they can provide higher income than traditional government and corporate bonds with equivalent credit ratings. This helps further to offset the effects of inflation on returns. There’s however a distinct difference between loans and bonds which makes the former more advantageous for investors in periods of rising interest rates. Floating-rate loans (which have a variable interest rate) offer a payment that moves in tandem with the interest rates of central banks, unlike bonds which have a fixed rate on issuance. In an environment, where it is hard to predict when interest rate rises will stop. BR managers can offer floating loans as their trading activity, which offers the benefit of being less affected by inflation than fixed-rate loans. These variable-rate loans are also preferrable from the BR manager’s perspective, as they tend to have higher interest rates than fixed-rate loans. BR managers use these and other tools to hedge against inflation.
Investing to make an impact
Environmental, social and governance (ESG) investing has increased in popularity due to the positive financial performance of ESG investments, the non-financial impact they have on our world, and a significant ongoing wealth transfer to a younger and more socially conscious generation. BR strategies often focus on loans to specific sectors like renewable energy, forestry and house builders that generate specific ESG benefits in addition to financial gains. One investment strategy that can offer compelling returns for BR investors is secured lending to the real estate sector. Through investing in portfolio companies that provide senior, asset-backed loans to developers on a project-by-project basis, investors have achieved steady returns with low volatility in a challenging investment environment. The real estate sector is not often considered to hold any ESG credentials, because of the perceived environmental impact of construction. However, in parts of the market, a focused investment strategy, construction reforms, and government initiatives can make for a more socially conscious investment opportunity than may present itself at first. There is a longstanding, structural shortage of affordable housing in the UK, leaving huge pent-up demand in communities across the country. Without alternative lenders funding development projects across a diverse range of locations, this is set to worsen and could push affordability further out of the average household’s reach. The supply deficit has been recognised by the governments for several years. In response, various policies have been enacted—for instance, Help to Buy—that has enabled many, often first-time buyers onto the property ladder at a more affordable level than would ordinarily be possible. Combining the social impact of the contribution towards building affordable housing and the environmental impact of driving more sustainable practices within the construction industry, loan finance for real estate development projects can not only be an effective investment to grow wealth while mitigating IHT, but is an increasingly valid option for ESG-conscious investors. Loans to Private Sector in the United Kingdom increased to 2698489 GBP Million in the fourth quarter of 2021 from 2663478 GBP Million in the third quarter of 2021.
Inheritance tax (IHT) anti-avoidance measures were announced at Budget 2013 and introduced in Finance Act 2013, affecting IHT deductions for liabilities. Following the changes, investors can no longer obtain IHT relief on loans used to buy shares that have been secured on their home or perhaps investment properties. Before FA 2013, such arrangements would carry an IHT benefit because of the general rule that an encumbrance on a property reduces the value of that property for IHT purposes. Thus, if the investor died, the shares would attract BR and typically the chargeable value of the home would be reduced by the mortgage. However, this potential benefit has now been countered by the FA 2013, which provides that any borrowing used to finance the purchase of BR eligible shares (and other qualifying BR assets) must be deducted against the value of those shares for BR purposes. Consider a scenario where a property developer company takes a loan to build houses. The shares in the company are BR qualifying (property development is a qualifying trade). If a shareholder in the company dies, then BR is available on the value of the assets less the value of the outstanding loan. This means that BR would now only be given against the ‘net value’ of the shares after deducting the debt. If the value of the shares at the time of the death of the investor exceeds the original loan amount (i.e., if the shares have increased in value), then any value in excess of the loan amount is BR-qualifying. In other words, while the outstanding loan amount doesn’t qualify for IHT relief, the added value does qualify—making borrowing to buy BR qualifying assets still potentially profitable. Needless to say, the company receiving the loan to purchase new equipment, expand its existing business, or pursue a new business opportunity is also expected to make a profit.
BR deductions for liabilities
Annual growth of lending to SMEs and large businesses
Source: Bank of England
Lending is an inherently risky business. It relies on trust in another entity to return the advanced amount in the agreed manner, at the agreed time, with the agreed interest. With increased fraudulent activities and money laundering, assessing a borrower’s background before lending any money has become critical. The level or riskiness of the loan will determine the level of thoroughness of the due diligence. Asset backing is obviously a good way to mitigate the risk of lending, but BR managers must be sure to verify all the assets backing their loans. Collateral due diligence, meaning all collateral appraisals, should involve field examinations, physical inventories, and searches for any other tax liabilities and liens. Lenders need to know the purpose of the loan and the ventures they are willing to enter.
Due diligence: a necessary precaution
UK: loans to private sector
Failure of due diligence: the Arena Television “fraud” case
More than 50 high street banks and specialist lenders are left holding the bag, after relying on non-existent collateral of almost £300 million to give out ‘secured’ loans to Arena Television, administrators have revealed. It appears that no more than nine of the 55 lenders to the broadcasting company bothered to thoroughly verify the assets supposedly backing their loans, according to an official filing by insolvency practitioners at Kroll. The lenders issued more than £90 million loans to the group on the basis of assets pledged as collateral, but the group “does not hold the vast majority of assets”, according to a filing. Now facing a shortfall of several thousand assets, forty-six lenders, owed a combined £182 million, “do not have recourse to any assets” underlying their lending, administrators said. Among the hoodwinked lenders are big names like Shawbrook, owed £34.6 million; HSBC, owed £29.5 million; the NatWest-owned Lombard, owed £24.2 million; and ABN Amro, owed £22.6 million. A number of non-bank and boutique lenders are also caught up in the alleged scam.
In light of the current cost of living crisis, Inheritance Tax has never been more topical.
Simon Housden - Sales and Marketing Director, TIME Investments
Jan 2017
Apr
Jul
Jan 2018
Jan 2019
Oct
Jan 2020
Jan 2021
Jan 2022
30 25 20 15 10 5 0 -5 -10 -15
% changes on a year earlier
Total
Large businesses
SMEs
Jul 2019
Jul 2020
£ million 2700000 2650000 2600000 2550000 2500000 2450000
“Are tax reliefs good value for money?” MPs want to know
The Treasury Select Committee is now considering submissions to its recent inquiry into tax reliefs. Their specific aim is to find out whether the system of reliefs as a whole achieves benefits for the UK economy that justify their cost.
09
The investigation will look at the many tax reliefs available to businesses as well as those available to individuals on their personal tax liabilities.
BR: the relief that takes a licking and keeps on ticking
For a number of years, critics have looked askance at Business Relief (BR). The relief is relatively costly (In 2019, it was estimated to cost the Exchequer approximately £1 billion per year. This, however, was just a quarter of the cost of transfers between spouses and civil partners). However, the Office of Tax Simplification (OTS) has used HMRC data to demonstrate that the extra tax raised by abolishing BR would not be enough to fund a significant cut in the rate of inheritance tax (IHT). Nonetheless, concerns that the OTS might recommend the outright abolition of BR have persisted. But all indications are that the OTS’ focus is on options for reform. It acknowledges that some aspects of the BR regime are distortive, overly complex and, at times, inconsistent with other parts of the UK tax code. The agency’s second report on simplifying IHT, published in July 2019, recognised the ‘important role’ that BR plays in ensuring that businesses can pass from one generation to another. In light of this primordial function of the Scheme, the question has been raised as to whether it is within the policy intent of BR to extend the relief to AIM-quoted shares, in particular where they are no longer held by the family or individuals originally owning the business. Ultimately, BR has proved irreplaceable in its role of rescuer of family businesses upon the death of the founder. Under the current rules, BR generally allows owners of family companies and other private businesses to pass on their shares to the next generation without an IHT charge. This helps to prevent the break-up of businesses on the death of a founder, the original intention of the relief. Particularly reluctant to blow their own trumpet, family businesses are surprisingly key contributors to the UK economy and also have a significant overlap with SMEs which are also very significant.
BR is a win/win, for both clients and the UK economy.
Dominique Butters - Blackfinch Executive Business Development Manager
Most people would be surprised to know that family businesses account for more than half of all private sector jobs in the UK as well as around 44% of private sector turnover.
Do the tax reliefs impact employment, investment and growth in the UK? Are the reliefs being used in the way they were intended? Do they cause problems to the tax system, such as through tax evasion or avoidance? What potential reforms could make tax reliefs more supportive of businesses and invetment? What reliefs can be added or removed? How effective is the current administration framework and means testing?
What the managers say
10
So how are the managers feeling about the BR market and overall investment market conditions? Here's what they have to say.
Dominique Butters
Executive Business Development Manager Blackfinch Investments
Stephen Daniels
Head of Investments TIME Investments
Many UK trading companies are facing the effects of higher inflation, rising interest rates and fuel costs, plus supply issues. However, some companies carrying out BR-qualifying trades have benefitted from the increase in energy prices and enjoyed higher returns. Clients feel all the more inspired to invest into renewable energy projects in the UK to future-proof our energy needs.
Clients who choose to invest into AIM shares for BR are usually more sophisticated clients who are very familiar with market volatility. They see a golden opportunity at the moment to buy shares at a substantial discount. Therefore, clients are not only getting their IHT planning done but also have the opportunity for significant capital growth.
Clients often want to retain the family home for sentimental reasons. Therefore, even if interest rates are rising it won’t matter to them. However, if clients are wishing to dispose of the home with interest rates rising and property prices at an all-time high it could be a very opportune time for them to sell.
The conflict in the Ukraine and subsequent disruption in the supply of natural gas has caused wholesale electricity prices and inflation to rise sharply. Business Relief (BR) portfolios that benefit from high inflation or high electricity prices should be able to withstand this period of economic uncertainty. Conversely, BR portfolios that are highly leveraged may suffer if interest rates continue to rise.
Market volatility has increased and fears of an impending recession have affected the share prices of fast growing companies such as technology providers. Whilst not fully immune, the lower volatility and more defensive AIM companies in traditional industries have performed better than the benchmark. Such businesses tend to hold higher cash reserves and generate consistent profits and are therefore better placed to withstand a recession.
The repayment rate has increased 100bps from the start of the year and, with potential further rate hikes in the future, advisers and their clients would be sensible to consider this cost. Some BR providers participate in the direct payment scheme, which may provide an optimum route to directly settle an estate, in part or in full, without the need to sell other assets, like the family home.
Daryl Thorpe
Partner Zenzic Capital
The Russia-Ukraine crisis has been causing knock-on effects globally. What do you see as the war’s impact on Business Relief?
Inflation has now become a structural issue as permanent constraints on supply have become evident and all the ‘free’ money pumped into the global economy in 2020/2021 overheating the system. The war in Ukraine has only added to this inflationary pressure, driving further spikes in energy and commodity prices, and representing its own set of supply-side challenges. These high rates of inflation will likely cause typical Business Relief investors to start to consider growth more closely, not just capital preservation. Erosion of capital value through inflation is now a real problem.
AIM-quoted shares can attract BR investment in hopes of potential IHT relief. With share prices suffering from the current crisis, what has been the impact on BR investment?
With the AIM market under-performing and the prospect of rising interest rates and concerns over economic growth acting as headwinds to growth company valuations, it will take some time for the market to bounce back. BR investors will start to consider diversifying their BR portfolio to include non-AIM investments that attract more stable returns.
This further highlights the need for investors and their advisers to work together and plan for IHT, involving the beneficiaries in the process too to minimise the impact any IHT bill will have. This additional cost does however need to be balanced with the ability of families to settle the liability over ten-year period and not have to emergency redeem other less liquid assets at potentially a less than optimal time in the cycle.
People who opt to pay inheritance tax in instalments to avoid selling the family home are being hit hard by the recent interest rate hikes. To what extent should investors and their advisers take into account this often forgotten and hidden cost of IHT?
So how are the managers feeling about the AIM market and overall investment market conditions? Here's what they have to say.
Market composition
This section takes a look at the state of the Business Relief market based on the number of offers in the market. Unless otherwise stated, this analysis uses data obtained from the MICAP platform and is correct as of 21 September 2022.
12
Latest government data show that inheritance tax (IHT) receipts for April to August 2022 were £2.9 billion, which is £0.3billion higher than the same period a year earlier. There was a previous spike in receipts from October to November 2020, March to August 2021 and in March 2022. The trend seems to confirm media reports that Britons are paying more IHT, causing investors to look for IHT mitigating strategies. Business Relief (BR), of course, reduces the IHT applicable to shares in a qualifying, making it a favoured choice for many estate planners.
VCT investee companies
66.7%
11.1%
22.2%
A unicorn is a private company valued at $1 billion (£718 million) or more. Worldwide, the growth in the number of unicorns has paralleled the global funding increase for new ventures and tech startups. The term unicorn was introduced by venture capital investor, Aileen Lee, in 2013. The moniker was meant to reflect the particular attributes of a unicorn: something highly desirable, but very difficult to obtain.
Open offers
Market composition of open offers by investment strategy
Growth
18.8%
37.7%
Growth & Income
Capital Preservation & Income
In spite of major challenges in the economy and persistent political uncertainty, the BR sector remains strong. There are currently 69 open BR offers, up by an impressive 6% since our last analysis in April, when there were 65.
The open offers adopt four major investment strategies: Capital Preservation and Growth (39.1%); Growth (37.7%); Growth and Income (18.8%); and Capital Preservation and Income (4.4%). Managers seem to favour sectors that are better positioned for potential growth amid today’s inflation and rising global tensions. This strategic asset allocation plan would seem to work very well in BR, which has relatively few sector-barring exclusions. (Although businesses dealing mainly in securities, stocks or shares, land or buildings, or the making or holding of investments are excluded). Indeed, the current rules allow a wide range of BR qualifying investments to UK investors. This includes anything from forestry, renewable energy (solar/hydro power etc), property finance to asset backed businesses such as pubs, health clubs, hotels. Stocks listed on the Alternative Investment market (AIM) also typically qualify for BR relief. BR offers investors opportunities to hedge their investments by investing in businesses that are likely to prosper during periods of inflation. Some underlying investments that are BR qualifying are positively correlated with inflation - for example, shorter term loans where rates are negotiated on a regular basis.
Investment strategy
Add to this the opportunity for diversification afforded by the extensive range of BR-qualifying businesses, and you have a useful tool with investment risk mitigation features. The average open offer invests in 16 companies, typically scattered across various sectors, aiming for growth and diversification. As the following graph shows, many BR investment managers set up a single company and investors become shareholders of that company. Then it is that company that invests in third party BR-qualifying companies. This suggests that the real average number of targeted investees is very likelyhigher than 16, the current average, including managers who use single companies to invest through.
Diversification
Target NO. of investee companies by open offers
January 2020 July 2020 May 2021 August 2021 April 2022
4.31% 4.14% 3.88% 3.34% 4.34%
AVERAGE
4% 3.96% 5% 9%
TARGET RETURNS OF OPEN OFFERS BY INVESTMENT STRATEGY
Capital Preservation & Income Capital Preservation & Growth Growth Growth & Income
MODE
TARGET RETURNS
OPEN OFFERS
4.34
39.1%
Capital Preservation & Growth
Clients love that they are helping the UK economy by investing into BR-qualifying investments, while also saving tax for their beneficiaries. It’s a win/win.
Dominique Butters, Executive Business Development Manager, Blackfinch Investments.
The open offers invest in AIM-quoted (55.7%) and asset-backed (44.3%) companies. Portfolios of AIM quoted companies typically target growth. As for asset-backed companies, the risk of a complete loss of capital is much lower because the assets used to back the investment can be used to offset any capital losses due to defaults. This means that BR managers seem to focus on growth and security—two vital themes during an inflationary era.
Investee companies
44.3%
55.7%
AIM listed
Asset-backed
40 30 20 10 0
Average
Mode
MIN
Median
MAX
16.231884
1,000000
20,000000
40,000000
Arguably in recovery mode, after a steady decline throughout the pandemic, the average target return now stands at 4.34%, up nearly 30% from a year ago. As noted in our last report, there are variations of the target return by investment strategy. Currently, open offers target up to 7% for Capital Preservation and Growth, and up to 10% for both Growth and Growth & Income. In mid-September, the Office of National Statistics (ONS) announced that the Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 8.6% in the 12 months to August 2022, down from 8.8% in July. This means that some open offers are still targeting inflation-beating returns in spite of considerable market challenges.
Target return
MEDIAN
3
4
Out of a total of 13 potential fees, 9 have decreased since April. The AMC Charged to Investee Company declined the most, dropping by 10%. The Initial Charge to Investors Excluding Adviser Fee went down by 4%. The AMC charged to investors, which has been sliding in recent months, barely rose by 1%.
Fees & charges
APRIL 2022
SEPTEMBER 2022
CHANGE
0.90% 0.3% 1.18% 0.88% 0.35% 1.18% 0.71% 0.14% 0.26% 1.42% 0.44% 0.49% 0.30%
CHARGES
Initial Charge to Investors Excluding Adviser Fee Initial Charge to Investee Company Total Initial Charge AMC Charged to Investor AMC Charged to Investee Company AMC Annual Per Fee Exit Per Fee Annual Per Hurdle Exit Per Hurdle Initial Deal Fee Exit Deal Fee Annual Admin Charge
0.94% 0.29% 1.2% 0.87% 0.39% 1.21% 0.78% 0.15% 0.28% 1.54% 0.45% 0.48% 0.29%
-4% +3% -2% +1% -10% -2% -9% -7% -4% -8% -2% +2% +3%
BR remains comparatively affordable for its purpose. The most common minimum subscription for the open offers is £25,000, though it can go as low as £15,000. But even a £15,000 BR investment can save £6,000 in IHT.
Minimum subscription
200000 150000 100000 50000 0
£48,478
£25,000
£15,000
£200,000
MICAP Market Snapshot
13
Leveraging its market overview position, MICAP is able to offer IFAs exclusive insight into the wider BR market. As a sister company of MICAP, we are able to offer the following snapshot of data, which is updated in real time, and pulled from the MICAP website.
Market Snapshot
Inheritance tax—What the numbers say
Inheritance tax (IHT) will raise £6.7 billion in 2022-23, forecast the Office for Budget Responsibility (OBR). This represents 0.7% of all tax receipts and is equivalent to 0.3% of the UK’s national income.
15
IHT is usually levied on the value of all the assets in an individual’s estate on death, after deducting any liabilities, exemptions and reliefs. Business Relief (BR) is one of the most valuable IHT reliefs, reducing the taxable value of some assets by 50% and others by 100%. IHT receipts have increased as a share of GDP since 2009-10, mainly due to rises in asset prices. Residential property makes up the largest share of most estates and average house prices have risen by more than 40% in that period. The rise also reflects significant fiscal drag as the IHT threshold has remained at £325,000 since 2009.
- text
The three main drivers of IHT receipts
The sudden jump in IHT receipts in the past couple of years was the result of not just the Coronavirus death toll, but market forces and government decisions as well. These drivers of IHT revenue include the knock-on effects of the Covid-19 pandemic on the volume of wealth transfers and IHT-liable deaths in recent years; the continued rises in asset values; and the government’s decision in March 2021 to maintain the IHT nil rate band thresholds at their 2020 to 2021 levels up to and including 2025 to 2026. Today, IHT receipts are at their highest level on record – both in nominal terms and as a percentage of Gross Domestic Product (GDP). There was a 14% (£729 million) increase in IHT receipts received by HMRC between the financial year 2020 to 2021 and the financial year 2021 to 2022, where receipts stood at £6.1 billion. This is the largest single-year rise in IHT receipts since the 2015 to 2016 financial year, when receipts rose by 22% (£848 million).
Source: ONS, OBR
Source: gov.uk
Latest data provided by HMRC (which covers only up to 2020), shows that net taxpaying estates valued £1 million or more accounted for 82% (£4.1 billion) of the total tax liability created in the tax year 2019 to 2020 (£4.96 billion). However, there were only 10,600 of these estates, representing 3.8% of all estates requiring a grant of representation for that year. Of those 10,600 around 1,200 did not pay tax, leaving 9,400 with an IHT liability. At the lower end of estate value distribution, net estates valued at less than £1 million accounted for £0.9 billion of the total tax liability, and around 96% of all estates requiring a grant of representation by number. There were around 13,500 of these estates which were taxable. Since the tax year 2009 to 2010, the average amount of tax paid per estate increased each year by an average of 3%, or by £4,200, until the tax year 2014 to 2015. The average liability then remained broadly flat at around £179,000 until the tax year 2017 to 2018, where it increased by £18,000 (10%) to £197,000. Similarly, the average liability increased by £12,000 (6%) in the tax year 2018 to 2019 to £209,000, and by £7,000 (3%) in the tax year 2019 to 2020 to £216,000. The large increases seen in the last three years are likely to be explained by the effects of the RNRB’s introduction. This new tax-free threshold was first introduced in the 2017 to 2018 tax year, where it was worth £100,000 to qualifying estates, and has been phased in in stages since then. Since its introduction, the availability of the RNRB to qualifying estates has meant a number of estates which beforehand would have paid a relatively small amount of tax no longer did so. This meant that those estates which remained taxable transferred larger amounts of wealth on average.
Liable estates and average tax paid
Trusts are generally used to remove assets from an estate, thereby lowering the IHT calculation, and for the purposes of accessing the RNRB which begins to taper away when the estate value exceeds £2 million. Holdover Relief could also be utilised in conjunction with BR here to defer any CGT otherwise arising on the gift of the shares into the trust. However, periodic IHT charges are generally applied to trust assets every ten years and on entry and exit.
chargeable trusts
As the table above shows, the net chargeable value of trusts increased by 21% a year on average to tax year 2014 to 2015, with large variations, reaching a peak of £2.6 billion in the tax year 2014 to 2015. Since then, the number of trusts and their value has fallen. This could be a consequence of the 2006 trust reforms to tackle tax avoidance using trusts. As part of this package, IHT charges were applied to some types of trust (including accumulation and maintenance trusts) to counter the use of trusts as a means of sheltering wealth from tax. The reduction in assets held in trust may reflect a number of older existing trusts coming to the end of their natural life and a lack of new ones being created. The introduction of the transferable nil rate band (TNRB) in 2007 may have also contributed to this decline, since it removed the incentive for some estates prior to 2007 to create nil rate band discretionary trusts. The declining use of trusts could also suggest much greater diversification across IHT mitigation measures, including BR.
HMRC cash receipts for tax due at the time of wealth transfer during lifetime have increased over the years. “These [charges] arise almost entirely on gifts to discretionary and other relevant property trusts, but occasionally include other immediately chargeable lifetime transfers,” notes HMRC. The affected investors could have avoided these charges by transferring the assets into a trust where assets are BR qualifying (i.e in qualifying trades and held by the settlor for a minimum of the years by the settlor before being placed in trust). This is because when BR qualifying assets are settled into a discretionary trust during the settlor’s lifetime, the potential lifetime charge to IHT (usually 20%) is reduced to zero. Within five years the projected IHT take is predicted to go up by another £2 billion a year, which is a jump of around 33% - a significant acceleration.
Where BR could help
Inheritance tax: latest forecast
IHT Receipts, financial year 2001 to 2002 to financial year 2021 to 2022
Number of chargeable trusts and net chargeable value of assets held in taxpaying trusts, tax year 2005 to 2006 to tax year 2020 to 2021
Each client scenario is unique, so an IHT calculator can prove useful for financial planners to forecast a client's potential future IHT liability.
Henny Dovland - Business Development Director, TIME Investments
1990-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
£ billion
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 (p) 2020-21 (p)
3,000 2,500 2,000 1.500 1,000 500 0
Number of trusts
Net capital value (£m)
7,000 6,000 5,000 4,000 3,000 2,000 1,000 -
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22
IHT Receipts (£M)
9 8 7 6 5 4 3 2 1 0
(Based on OBR's March 2022 Economic and fiscal outlook (EFO) forecast)
Money trees: the compelling BR-forestry opportunity
Forestry investment is a great long-term hedge against inflation that can also access the benefits of Business Relief (BR). Held for a period of two years, investment in forestry will qualify for BR, giving the value of the investment complete relief from inheritance tax (IHT).
16
Therefore, on the death of the owner, the beneficiaries will receive the full value of the investment, with no tax suffered. Commercial forestry is a sustainable real asset that diversifies an investment portfolio, with natural growth providing exposure to potential increases in both the price of timber and the underlying land. In spite of its traditional focus on capital preservation, BR is increasingly open to such lucrative strategies, which offer estate planning solutions that don’t sacrifice returns. With the UK inflation rate at a 40-year high, and still heading up amid turbulent political and economic times, many investors are attracted to physical, tangible assets that promise some sort of protection against inflation, upheaval in the financial system, or political change. While not many are turning to woodland, it is considered to be one of the most tax-efficient ways to invest in land in the United Kingdom. It’s no wonder that some of the largest investment funds, banks and hedge Funds have timber property in their portfolios.
- Rupert West, Investment Director, Puma Investments
Britain has excellent climatic conditions for growing trees. As a result, the country is known for its lush greenery, rolling hills, and vast forests and woodland areas. According to government statistics, Woodland covers around 13% of the country, the best part of 3.2 million hectares. Forestry provides both long-term income and capital growth for UK investors, the income being generated by the sale of the timber felled each year. The biggest customers come from the construction industry, but the paper and packaging business is a significant source of demand too. Growth, meanwhile, is driven by the rising capital value of the asset over time; as timber prices rise, so does the value of the forests producing it. What makes forestry particularly interesting is that it tends to move in a different way from other assets. So, adding it to your portfolio should help you to reduce the risk of volatility without damaging your returns. Consider also the continuing nature of the investment. Whatever else might be going on in the world—whether Brexit, inflation, or Putin’s war—the trees keep on growing and therefore adding more value to the investment.
The UK advantage
Source: wealthclub.co.uk
Forestry: cumulative performance over 1, 5, 10 and 25 years
Some emerging opportunities and themes are driving increased interest in the forestry asset class, with tailwinds from the movement of environmental, social, and governance (ESG) integration throughout capital markets and corporate responsibility. The consideration of ESG issues is typically an integral part of the forestry investment process, taking into account the long-term nature of forestry investing and the different stages of a forestry investment’s lifecycle. Different forestry investment strategies will require specific processes tailored to their objective. More generally, however, strong environmental stewardship can enhance the underlying value of timberland, as well as help to secure a price premium for timber-related products through certification programmes, and support sustainable long-term forest growth. Over the years, forestry has evolved as an asset class to be much more focused on multiple benefits, to address the needs of more stakeholders, and to accommodate longer-term investment horizons.
ESG factors in forestry
Through BR, all commercial forestry benefits from 100% IHT relief once held for two years. If held at death, there is no IHT payable on the total value of the investment including both land and trees. If the owner dies before completing the full two-year qualifying period for 100% BR, two scenarios apply: Income generated from commercial forestry is exempt from both income tax and corporation tax. And the increase in the value of timber is exempt from capital gains tax. It is also possible to secure 100% roll-over relief by acquiring land for afforestation. There are also significant benefits in relation to trusts. Forestry which qualifies for 100% BR can be settled into a trust by individuals without incurring an IHT charge. Hold-over relief can be used to defer any gain for CGT purposes. Where forestry, which qualifies for BR, is held in a trust no IHT liability arises at the ten-year anniversary charge date on the total value of the asset. Returns to investors in forestry are made up of sales of timber (standing or felled), sales of other goods and services, increases in the value of the woodland (from annual increment or market factors), and the net income from subsidies (e.g., planting grants) less taxes. The investors' costs are made up of employment costs and other purchases. It’s worth noting that most timber investment schemes on offer are classified as Unregulated Collective Investment Schemes (UCIS), which the Financial Conduct Authority (FCA) does not consider are suitable for the majority of Investors. In particular, as the name suggests, a UCIS is not regulated by the FCA and nor is it covered by the Financial Services Compensation Scheme. Nonetheless, if it is structured in the right way, investment in commercial forestry represents a good shelter against inheritance tax for the right investor. It is expected to produce periodic tax-free income, year after year, as mature trees are felled and the timber sold.
Save on tax, save the planet
One is that if the forest is bequeathed to a spouse, then the spouse’s two-year qualifying period is treated as starting at the date of the original purchase of the forest. The other scenario is a bequest to any other person. Then any IHT due may be paid in ten annual instalments, interest free.
Forestry facts & figures
The latest national statistics on woodland, produced by Forest Research, were released on 16 June 2022 according to the arrangements approved by the UK Statistics Authority. The key findings highlight the major trends and developments in the sector.
A 2018 survey showed that almost two thirds of 25- to 45-year-olds expect to receive an inheritance windfall, while a large proportion of the same group are simultaneously struggling to engage with longer-term financial planning
Daryl Thorpe - Partner, Zenzic Capital
2021
5 years (% p.a.)
10 years (% p.a.)
25 years (% p.a.)
40 30 20 10 0 -10
Annual return (%)
UK Forestry IA £ Corporate Bonds
IA UK Equity Income IA Gilts
IA UK All Companies IA UK Direct Property
The area of woodland in the UK at 31 March 2022 is estimated to be 3.24 million hectares. This represents 13% of the total land area in the UK, 19% in Scotland, 15% in Wales, 10% in England, and 9% in Northern Ireland.
13%
Of the total UK woodland area, 0.86 million hectares is owned or managed by Forestry England, Forestry and Land Scotland, Natural Resources Wales or the Forest Service (in Northern Ireland).
Woodland Carbon Code projects in the UK that were validated (including those that were also verified) at 31 March 2022 were predicted to sequester a total of 6.9 million tonnes of carbon dioxide over their lifetime of up to 100 years. This represents 5.5 million tonnes in Scotland, 1.1 million tonnes in England, 230 thousand tonnes in Wales and 11 thousand tonnes in Northern Ireland.
The total certified woodland area in the UK at 31 March 2022 is 1.42 million hectares, including all Forestry England/Forestry and Land Scotland/Welsh Government Woodland Estate/Forest Service woodland. Overall, 44% of the UK woodland area is certified. Around 14 thousand hectares of newly created woodland were reported in the UK in 2021-22.
Around 15 thousand hectares of publicly funded woodland restocking were reported in the UK in 2021-22.
17
ne of the biggest advantages of investments that qualify for Business Relief (BR) is that unlike with trusts and gifts, BR-qualifying shares are fully relievable from Inheritance Tax (IHT), when held for at least two years and at time of death. However, should the death of the client occur before two years, married clients will pass those BR-qualifying assets to their spouse and the previous period of ownership will count towards the new ownership period. In cases where the death of the client occurs after two years (and where the BR-qualifying asset is held in single name) it could be gifted to beneficiaries instead of the spouse. This would mean that – provided the second spouse doesn’t need the money – the children can receive part of their inheritance upon the death of the first parent, rather than waiting for both parents to die. In those instances where the client is bequeathing money to a charity in their will, it is imperative that the will is written to ensure the money is given from the taxable estate, otherwise it could use up valuable tax allowances and reliefs that would otherwise be available to the beneficiaries. For example, if a will stipulates 50% of the estate is to be distributed among the deceased’s children, and 50% given to charity, if written too simply it could use up half of the available IHT reliefs (including BR) and could leave the beneficiaries facing an IHT liability. Here's a scenario that shows this in practice. A client has an estate valued at £2m, but thanks to £1m of nil-rate band (NRB) and residential nil-rate band (RNRB) allowances, and having the remainder invested in BR-qualifying assets, no IHT should be due on the estate. However, due to some unfortunate will wording, 50% of the client’s IHT reliefs and allowances are used for the 50% charitable gift, leaving only 50% of IHT reliefs and allowances for the children, meaning IHT is payable. This unfortunate outcome could be even worse – the estate could lose all of the RNRB on the family home as it wasn’t specifically left in the will to the direct descendants. It's important for advisers to consider this potential outcome even in instances where they are not advising clients on BR-qualifying assets. Advisers should also consider checking whether the property is not being left to a discretionary trust (set up before the transferable NRB came into force) as this would stop beneficiaries from benefitting from the RNRB as the property is not being left to a direct descendant. It is always worth advisers determining whether a client’s will has been properly written, avoids any potential confusion and is legally valid. This is also a good time to ensure the will is aligned with the client’s wishes, and that they are using all the available tax reliefs and IHT allowances. It’s also a great way for advisers to connect with solicitors, demonstrate their specialist knowledge in the estate planning arena, and build stronger relationships for the future.
O
Introduction
Market Update
Considerations for Investment
Industry Analysis
Managers in Focus
What's on the Horizon
Further Learning
Executive Business Development Manager Blackfinch Group
thought leadership
Why it pays to take a closer look at client wills
blackfinch.com 01452 717070 enquiries@blackfinch.com
it is imperative that the will is written to ensure the money is given from the taxable estate, otherwise it could use up valuable tax allowances and reliefs that would otherwise be available to the beneficiaries.
It is always worth advisers determining whether a client’s will has been properly written, avoids any potential confusion and is legally valid.
18
There are three requirements. The property must fall within several prescribed categories of property, satisfy a minimum ownership requirement, and not be caught by one of the automatic exclusions. A business (such as a sole trader), an interest in a business (such as a partnership share), or unquoted company shares will qualify for 100% BR. Land, buildings, or machinery owned by the transferor and used wholly or mainly for the purpose of a business carried on by a company that they controlled will qualify for 50% BR. Tip: It may be worth considering whether a property used by the business would be better being transferred into the business to increase the relief from 50% to 100% although advice should be sought regarding other tax consequences this may have. If property qualifies it must have been owned by the transferor throughout the twoyear period leading up to the transfer. Tip: If Business property is replaced by new property that also qualifies, the ownership period can continue. Even if a business owner does not want to purchase another business there are BR products that can be considered after the sale of a business interest to maintain the ownership period. Finally, BR will not be available if the underlying business consisted wholly or mainly of prohibited activities such as dealing in securities, stocks or shares, land, or buildings and the making and holding of investments. For example, a property development business would be likely to qualify for BR, whereas a property rental business where the owner has little involvement in the management of the business is not likely to obtain the relief. Whether a business consists of ‘wholly or mainly’ prohibited activities will be a matter of fact looking at the business in the round, possibly over several years. Tip: Holding companies, despite wholly or mainly holding or making investments, can qualify if the businesses within the structure do not fail the prohibited activities test. Assets used for personal benefit, such as a property or a private yacht, are unlikely to qualify for BR just because they are owned by a company or are cash reserves more than what would normally be required for the company’s normal business trading cycle. It is possible for parts of a business to qualify for BP while others don’t. For example, a trading business worth £2million with £500,000 of surplus cash may be able to qualify for £1.5million BR despite the cash reserve. It is important for business owners to consider and regularly review the structure of their business to ensure that they can take advantage of and maximise BR which can prove a very important and financially beneficial Inheritance Tax planning tool.
Considerations for Business Owners
time-investments.com 020 7391 4747 questions@time-investments.com
hat conditions need to be met to receive BR?
Originally published in An Advisers Guide to Business Relief, produced by IP and sponsored by:
It is possible for parts of a business to qualify for BP while others don’t.
Land, buildings, or machinery owned by the transferor and used wholly or mainly for the purpose of a business carried on by a company that they controlled will qualify for 50% BR.
This content was written by PAUL MOUNCE, PARTNER, GOSSCHALKS for the Third edition of Intelligent Partnership's 'An adviser's guide to Business Relief', sponsored by TIME Investments
PAUL MOUNCE
PARTNER GOSSCHALKS
W
19
n the previous Business Relief update we looked at The Rise of the Inheritance Economy which outlined the importance of, and reliance on, wealth transfer between generations. With gifting becoming increasingly considered as a cornerstone of passing wealth down through the generations, what other challenges does this create for families and financial advisers? The issue of wealth transfer has always been crucial, but now more than ever, with many wanting, and often needing, to support their children and grandchildren. But the older generations are also much more cautious; society itself is very different and the impact of changing relationship arrangements and break ups cannot be underestimated, adding a great deal of complexity to the decisions to be made. Differences in work ethic between generations creates further worry. Will the beneficiaries have the financial education to manage their assets? Will they have the tools or motivation to protect and grow their own newly acquired wealth further? The pandemic has also resulted in a re-framing of life for many, with some becoming less interested in leaving an inheritance, and more committed to living well today - upsizing rather than downsizing, travelling, and making memories with their adult children and grandchildren. If this wasn’t enough to consider, then add in levels of inflation not seen for a generation, and the end of the ultra-low interest rate environment, and it’s no wonder many have conflicting thoughts as to how best to handle the who, how, why and when of wealth transfer. Effective inter-generational planning therefore will work best with a longer-term strategy and measures being taken over time. Those making the decisions need to walk a fine line to strike a balance between planning for inheritance tax but also preserving the family wealth, whilst helping their descendants out along the way, and trying to enjoy themselves at the same time! It is a difficult conundrum, but one that can be solved by involving younger generations early on in decision-making and careful structuring with in-built flexibility and control. Understanding the next generations attitude towards wealth and ensuring they have a good understanding of how to protect it can only help too. So, to ease the challenges and help inform the decision process, some helpful key criteria may be useful to consider:
I
The Challenges of Wealth Transfer
www.zenziccapital.com 020 3818 9235 zeps@zenziccapital.com
An estimated £300bn will be passed through generations over the coming decade, growing to £5.5tn over the next 30 year with a large proportion comprised of property.
The increase in wealth in the UK has been remarkable in recent decades, with total household net worth increasing by a factor of four from £2.8 trillion in 1995 to £11.2 trillion in 2020.
Daryl Thorpe, Partner, Zenzic Capital
Review - a crucial first step is to understand the income and assets available to give away is the crucial first step. Future potential needs such as personal care costs should not be underestimated. Advice - there are many misconceptions and myths surrounding what can and cannot be done so expert professional advice is vital. For example, gifting during a lifetime can be an effective option but how does it inter-play with the other criteria here, particularly education and control? Gifts are subject to the potentially exempt transfer “7 year” rule. Protection - consider where there are risks for the next generation in having assets and wealth. For instance, the impact of divorce, maturity levels, or attitude to money can all have a greater impact than HMRC. Generation skipping - if the second generation is still growing the pot then consider providing for the grandchildren and beyond. Education - wealth rarely comes easily. Nurturing a work ethic in the next generation and instilling a sense of responsibility to future generations goes a long way to countering the risk of "entitlement". Control - how can objectives be achieved whilst also retaining control and flexibility over wealth. For example, many Business Relief investment products provide an IHT shelter but also allow quick access to the funds should circumstances change.
It is worth also remembering that perspectives and situations change over time, so continued discussion and evaluation of goals and objectives are important. The wealth transfer story is far more complex than meets the eye - there is no one size fits all solution. These challenges though provide opportunities for financial advisers to work with their clients and beneficiaries for the long-term protection and growth of wealth that took so much hard work to achieve. And to ensure that money is available to lend a helping hand when needed, whilst also ticking off the bucket list at the same time!
An estimated £300bn will be passed through generations over the coming decade, growing to £5.5tn over the next 30 years with a large proportion comprised of property.
A 2018 survey showed that almost two thirds of 25- to 45-year-olds expect to receive an inheritance windfall, while a large proportion of the same group are simultaneously struggling to engage with longer-term financial planning.
21
Manager name Description of Offer Provider year founded Provider Assets Under Management Product Assets Under Management Sector Launch Date (of Service) Number of Investee Companies Annual return since inception Target annual return and/or target yield (where stated) Minimum Investment Income available? Number of directors Legal Structure Initial fee AMC Performance Fee Performance Hurdle Target Liquidity
BR comparison table
Blackfinch Investments Ltd The Adapt IHT Portfolios are our flagship Inheritance Tax (IHT) solution and are well established. It offers return potential and competitive charges alongside a route to IHT relief. Our four model portfolios cater to the need for diverse, ethically focused IHT offerings. Blackfinch only takes its annual management fee of 0.5% plus VAT after achieving a minimum target return of 3% p.a., 4% p.a., 4.5% or 5%+ p.a., depending on which of the four model portfolios an investor has selected. 1992 £692m (as at 08/08/2022) £300m (as at 08/08/2022) Asset-backed lending, property development finance and renewable energy generation December 2013 3 underlying companies. Refer to our monthly factsheet/quarterly performance sheets for latest discrete annual performance figures. Annualised return figures for each of the portfolios since inception (as at 30/06/2022) are as follows: Ethical: 2.95% Balanced: 3.84% Balanced Growth: 4.28% Growth: 4.71% Ethical 3% Balanced 4% Balanced Growth 4.5% Growth 5%+ All targets are net of fees £25,000 We do not have an income portfolio, but regular withdrawals can be facilitated on a quarterly, semi-annual or annual basis We have two directors involved in this product, as well as two independent directors across the three investee companies, where the same internal and external director will represent both lending companies. Discretionary Portfolio Service 2% 0.5% + VAT deferred until exit and only if target return has been achieved N/A N/A 2-4 weeks
TIME Investments TIME:CTC (Corporate Trading Companies) is an IHT solution designed to help businesses utilise or reinstate existing BR, allowing them to mitigate their IHT liabilities, potentially immediately. The service holds a 25-year track record and allows business owners to maintain control of their assets, avoiding the need for trusts or to gift assets to obtain relief. The service targets a net return of between 3% and 4.5% p.a., investing into asset-backed businesses. 2011 £4.5 billion £108 million Primarily secured property lending and operational real estate finance. October 1995 N/A N/A 3% - 4.5% £100,000 (£25,000 top up) Yes, on request only and subject to the company having sufficient retained earnings 1 director from TIME and CTC Directorships Limited (a board of independent non-executive directors) appointed to each CTC company Bespoke IHT Service 3.5% + VAT 0.5% (inclusive of VAT) and deferred until exit and only payable from the excess over a return of 3.5% p.a. N/A N/A Target 4-6 weeks but could vary depending on the circumstances
TIME Investments TIME:Advance is a simple and effective IHT solution that uses BR to help investors potentially mitigate their IHT liabilities. The service invests in a diversified portfolio of asset-backed businesses and targets a net return of between 3% and 4.5% p.a. The service has received consistent industry recognition, with multiple wins at both Investment Week’s Tax Efficiency Awards and the Growth Investor Awards. 2011 £4.5 billion £975 million Renewable energy (wind, solar, hydro & biomass), secured property lending, operational real estate finance, self-storage and commercial forestry. February 2013 We currently choose to invest in one company, Elm Trading Limited. 4.56% 3% - 4.5% £25,000 (£10,000 top up) Yes, by regular withdrawal option (no dividends paid) available on a quarterly basis. 4 directors & independent advisory panel of 6 3 Non-Exec Directors Discretionary Portfolio Service 2.5% 0.5% (inclusive of VAT) and deferred until exit and only payable from the excess over a return of 3.5% p.a. N/A N/A We aim to facilitate a dealing event on a weekly basis every Tuesday and pay out redemptions within two weeks (subject to liquidity).
Sapphire Capital Partners LLP Zenzic Estate Planning Service (“ZEPS”) was created to give investors access to attractive investment returns underpinned by UK real estate whilst potentially enabling them to shelter part of their estate from Inheritance Tax (“IHT”). The service has a base level target return of 6.0% with potential for further uplift from a share in any over-performance. A simple, transparent fee structure also ensures alignment between manager and investor. 2009 £300.0m £5.0m Real Estate January 2020 2 6.0% 6.0% £25,000.00 Yes 3 Limited company 2.0% 2.0% Yes 8.0% 30 days
Sapphire Capital Partners LLP Zenzic Estate Planning Service 2009 £300.0m £4.8m Real Estate January 2020 2 6.0% 6.0% £25,000.00 Yes 3 Limited company 2.0% 2.0% Yes 10.0% 30 days
Inheritance tax and farmland in environmental agreements
The government’s renewed focus on environmentally beneficial uses of land has raised concerns among landowners that the change of use could make their land (along with any associated farmhouse and buildings) lose its favourable tax status under the Agricultural Property Relief (APR) and Business Relief (BR) schemes.
23
Several factors see lively discussion of the potential for rural land to provide environmental benefits whether under state schemes or for commercial reward. As post-Brexit agricultural policies develop, so the almost pure subsidy income of the area-based Basic Payment either carries more cost (as planned in Scotland) or is withdrawn (as has now started in England). That leads to farmers, especially on more marginal ground reappraising their businesses, some looking to environmental income. The intertwined issues of mitigating and adapting to climate change, biodiversity, water and air quality all drive new questions for farming. The still very fledgling markets in carbon, biodiversity net gain and nutrient neutrality to protect water are attracting interest but, often ignorant of what might be involved, the risk is of deals that might be regretted. Carbon offsetting looks much less valuable than the need for farmers to reduce their own carbon. There may be value in biodiversity net gain and nutrient neutrality but their markets may be smaller than people think. Nonetheless, agreements can be made to commit farmland to create habitats, sequester carbon and offset nutrients.
The Background
There have been a number of grey areas and tax cases where HMRC has refused BR where the trades of businesses were fundamentally based on letting land with other services. In fact, the OTS’ first report of its IHT review, published in November 2018, recommended that the government should consider whether to align the IHT treatment of furnished holiday lets with that of income tax and capital gains tax, where they are treated as trading providing that certain conditions are met. For the purposes of BR, the activity of running furnished holiday lets is generally not a qualifying trade. Since such companies are treated as trading for income tax and CGT purposes, the OTS recommended that this is extended to Business Relief. This would immediately remove substantial complexities in BR and could have positive implications for multiple other land-based activities and their Business Relief qualification. To date, this has not been implemented, likely because it would be expensive to implement, and at a time when politicians are usually trying to penalise the ownership of second homes as part of their efforts to free up housing stock, this would be a surprising turnabout. Therefore, the suggestion to tweak APR in the way suggested by CAAV may be better received by government and more likely to ensure that at least one of the reliefs covers the environmental activities that meet the UK's sustainability drive. To find out more about the relevant tax cases, see: BR Guide (3rd edition) BR Guide (2nd edition) BR Guide (1st edition)
Editor’s note:
One answer to this is to adapt the existing model of the now largely redundant s.124C of the Inheritance Tax Act 1984 added in 1997. This provides that land in agreements under specified Habitats Regulations is regarded as agricultural land and that this use is an agricultural use for Inheritance Tax. The CAAV proposal is that land in recognised environmental agreements be similarly deemed agricultural for APR so, as an illustration, benefitting land: in an agreement under a financial assistance scheme under the Agriculture Act 2020 subject to a conservation covenant under the Environment Act 2021 on the prospective Biodiversity Net Gain register. With a similar provision also made in 1995 for short rotation coppice, this offers a straightforward “oven-ready” answer, giving a simple and very strong signal to landowners that the tax system supports the Government’s objectives here, not hindering them or creating uncertainty. The importance of APR was shown in 1995 when England’s tenancy reform was supported by the extension of full APR to newly let land. That combined legal and fiscal reform turned the haemorrhaging let sector round to attract new land and grow. Using APR here would remove a reason for landlords to constrain tenants’ environmental commitments and cover leases to environmental managers – varying BR with its wider effects would not assist with either. This implies that a change to APR seems more appropriate than a change to BR. APR is specific to agricultural land and so changing it would touch on the larger BR regime for every privately owned business. At the same time, BR’s awkwardness with let property helps neither an agricultural landlord nor the farmer willing to let a significant part of the land to an environmental user (such as a habitat bank). APR (since 1995) is tailored to enable both of those options. The irony is that, without such a measure, farmland is more likely to remain fully farmed and so qualify for APR anyway with no wider environmental benefit. This answer would open markets with little tax cost.
The Answer
Inevitably taxation, notably Inheritance Tax, is a factor in this decision making. While tax should not drive doing something, it can be a powerful incentive not to act. Farmland, with a capital value disproportionate to its income potential, is particularly exposed to IHT’s 40% tax charge, making access to Agricultural Property (APR) and Business Reliefs (BR) important. As the Treasury has said, they exist: Where do environmental uses and agreements sit in this? Agricultural land or pasture occupied for the purposes of agriculture is, subject to certain conditions, eligible for 100% APR on its agricultural value (50% for land let before 1995). APR can then apply to agricultural buildings occupied with that land and to a house used for the day-to-day management of that land (a farmhouse). BR, with 100% of market value at stake, requires the operation to be predominantly an active business, not investment. Diminished business activity or letting land to an environmental manager may risk that. If the land moves to a less intensive agricultural use, the purpose of the occupation could be environmental or agricultural according to the facts. Many lesser changes with farming continuing might not, on analysis, disturb APR or BR but issues could lie with: Such uses, however much needed by society, risk the owner no longer having agricultural land (for APR) or a business (BR). In particular, the prospect of losing APR is a real and significant barrier to landowners who might otherwise participate in such schemes. That hinders the delivery of the Government’s environmental policies.
The Problem
“To ensure agricultural businesses or farms do not have to be sold or broken up following the death of the owner.” (Non-Structural Tax Reliefs and Objectives, November 2021)
DEFRA’s proposed Landscape Recovery and Local Nature Recovery Schemes should continuing agricultural use be incompatible with the commitment agreements that take farmland out of agricultural use to help meet nutrient neutrality requirements or for Biodiversity Net Gain agreements to restore peat that make it unfarmable wetland.
Jeremy Moody
secretary and adviser at the Central Association for Agricultural Valuers
www.caav.org.uk 01452 831815 enquire@caav.org.uk
26
While the future shape of IHT is uncertain, the tax itself is unlikely to disappear. What changes would you like to see?
The benefit of BR investing is that it is simple. It is an investment which if held for two years-plus, and at the date of death, receives 100% IHT relief. I would like to see ALL IHT planning treated as simply. Reporting on trusts has become so onerous it puts many advisers and clients off this type of planning.
Inheritance tax receipts have soared to record highs. What are the implications for BR, arguably the main form of IHT relief?
It is likely to make BR more appealing to those clients who will be seeking ways to pass more of their hard-earned money on to the people they choose to benefit from it. Clients do like the fact that investing into BR does help the UK economy too though.
First introduced in the 1976 Finance Act, BR is nearing the half-century mark. How do you envision the future of BR?
I see the future as bright – the reason being that the tax relief is not only good for the client and their loved ones but also brilliant for the UK economy – it’s a win-win. Generally, to benefit from BR, clients have to invest into UK small companies that are trading, paying taxes and employing people. It’s a virtuous circle.
The IHT rules are complex and would benefit from simplification, providing that this does not increase the IHT costs to taxpayers. The Residence Nil Rate Band (RNRB) in particular is difficult for taxpayers to understand and restrictive for many, so extending the standard Nil Rate Band by an equivalent amount and removing the RNRB would be a welcome change. Increases and simplification to the gifting rules, which have been frozen since the 1980s, would benefit many. Finally, clarification on which, if any, of the many remaining recommendations made by the OTS will be taken forward would be welcome.
With both the Nil-Rate and Residence Nil Rate bands frozen for the foreseeable future, we anticipate a greater need for advisers and investors to access Business Relief as a flexible and robust IHT mitigation strategy. We expect to see the market for Business Relief solutions continue to grow over the coming years.
UK SMEs are a key provider of employment and contributor of tax to the UK Treasury. Business Relief continues to provide a vital and necessary tax relief to entrepreneurs and owners of SMEs. Successive Governments have left Business Relief unchanged and therefore we do not envision any material changes to be made in the near future.
IHT receipts are estimated to climb 36% to £37 billion for the period from 2022 to 2027 according to the Office for Budget Responsibility’s economic and fiscal outlook. This is clearly a key source of income for the Treasury which they’ll be content to see continuing to increase. Therefore, it becomes more of a political issue – for example in a high inflation environment, will the current freeze on IHT allowances to 2026 be reconsidered?
With more people being caught up in the IHT net, demand will continue to grow. However, the product offerings will need to evolve to become more attractive to more people who may have varying objectives. Traditionally, BR has been a simple capital preservation play to benefit from IHT relief, but it can evolve further to offer good investment returns in their own right, alongside the tax efficient benefits.
BR has clearly evolved over the years since its original primary objective of protecting family run businesses. Product choice, diversification of investing and wider awareness and accessibility are all areas for future improvement for BR, which will need to be driven in no small part by the IFA community.
24
Learning objectives
How did you do?
Covered in Section 2: Market Update
Describe how Business Relief sits within the current IHT landscape
Identify the main developments and news in the Business Relief market
Section 6: What’s on the Horizon
Recognise the various factors that will affect the Business Relief market in the coming months
Covered in Section 6: What’s on the Horizon
Analyse the latest Business Relief-related data and statistics
Covered in Section 4: Industry Analysis and Section 3: Considerations for Investment
Evaluate the key fees and charges applied by Business Relief managers
Covered in Section 3: Considerations for Investment
Benchmark current products and providers against each other on key investment criteria
Covered in Section 4: Industry Analysis and Section 5 Managers in Focus
HOW DID YOU DO?
CPD and feedback
27
Intelligent Partnership has achieved accredited status from the CII and PFS. Members of these professional organisations represent the majority of the insurance, investment and financial services industry.
R
eaders of the Business Relief Quarterly Update can claim up to two structured CPD hours towards their CII or PFS member CPD scheme for the time spent reading this Update (excluding breaks). The review process included an assessment of the technical accuracy and quality of the material against CPD Accreditation standards. Achieving the recognised industry standard afforded by these organisations for this Update, and our training, demonstrates our commitment to delivering only balanced, informative and high quality content to the financial services and investment community. In order to obtain CPD and meet accreditation standards, readers must complete a short questionnaire and provide feedback on the report. This includes 10 multiple choice questions to demonstrate learning and a feedback form to assist in the compilation and improvement of future reports. To claim your CPD please visit: intelligent-partnership.com/cpd
Intelligent Partnership actively welcomes feedback, thoughts and comments to help shape the development of these Quarterly Industry Updates. Greater participation, transparency and fuller disclosure from industry participants should help foster best practice and drive out poor practice. To give your feedback please email: publications@intelligent-partnership.com
About intelligent partnership
28
Intelligent Partnership is the UK’s leading provider of insights and education in the tax advantaged and alternative investments space.
We provide a wide variety of ways to keep advisers and industry professionals up to date with the latest developments. Our content includes a range of engaging, accessible and CPD accredited resources as well as industry leading events:
Free, award winning series including EIS, VCT, BR and AIM Updates offering ongoing observations and intelligence, the latest thoughts and opinions of managers and providers and a comparison of open investment opportunities.
Regular Industry Updates
Unlocking the practical and regulatory aspects of various areas across the tax-advantaged and tax planning spaces including estate planning and business relief, our guides for advisers, lawyers and accountants are updated annually to provide handy, accessible and everyday resources.
Professional Guides
A deeper dive into individual providers giving their input on particular market issues and more detail on the strategies and offerings they have developed to address them.
PROVIDER SPOTLIGHTS
A weekly snapshot of the latest articles, commentary and market data for financial services professionals, in an easy-to-read briefing on Tax Efficient Investments.
WEEKLY INVESTMENT BRIEFINGS
Free events online and across the country, giving advisers the opportunity to build their knowledge of tax wrappers and less mainstream asset classes and ask questions. Providers present their investment opportunities on a like for like basis and online events include additional content from independent expert commentators.
SHOWCASES
Heading into their eighth year, the Growth Investor awards and the Growth Finance awards celebrate the role of the UK SME investment and finance communities in job and wealth creation.
AWARDS
Intelligent Partnership produces INTERGEN, an immersive experience that focuses on the wealth, tax and estate planning needs of different generations and aims to reshape the future of professional advice for every generation. For more information, contact:
CONFERENCES
Our CPD accredited e-learning programme is aimed at regulated advisers, wealth managers, paraplanners, accountants and solicitors that require a recognised level of knowledge & understanding in areas of Tax & Estate Planning.
ACCREDITATIONS
chris@intelligent-partnership.com
31
quarterly industry updates
Heading into their seventh year, the Growth Investor awards and the Growth Finance awards celebrate the role of the UK SME investment and finance communities in job and wealth creation.
About
e provide a wide variety of ways to keep advisers and industry professionals up to date with the latest developments. Our content includes a range of engaging, accessible and CPD accredited resources as well as industry leading events:
disclaimer
29
This publication is not included in the CLA Licence so you must not copy any portion of it without the permission of the publisher. All rights reserved. No parts of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means including electronic, mechanical, photocopy, recording or otherwise, without written permission of the publisher. This publication contains general information only and the contributors are not, by means of this publication, rendering accounting, business, financial, investment, legal, tax or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser. Neither the contributors, their firms, affiliates nor related entities shall be responsible for any loss sustained by any person who relies on this publication. The views and opinions expressed are solely those of the authors and need not reflect those of their employing institutions. Although every reasonable effort has been made to ensure the accuracy of this publication, the publisher accepts no responsibility for any errors or omissions within this publication or for any expense or other loss alleged to have arisen in any way in connection with a reader’s use of this publication. This publication is based on the authors’ understanding of the structure of the arrangements detailed, the current tax legislation and HM Revenue & Customs practice as at November 2022 which could change in the future. It is not an offer to sell, or a solicitation of an offer to buy, the instruments described in this document. This material is not intended to constitute legal or tax advice and we recommend that prospective investors consult their own suitably qualified professional advisers concerning the possible tax consequences of purchasing, holding, selling or otherwise disposing of shares in potentially Business Relief qualifying companies. Intelligent Partnership is not authorised and regulated by the Financial Conduct Authority and does not give advice, information or promote itself to individual retail investors. It is the responsibility of readers to satisfy themselves as to whether any arrangement contemplated is suitable for recommendation to their clients. Tax treatment depends on an investor’s individual circumstances and may be subject to change. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.
This publication is not included in the CLA Licence so you must not copy any portion of it without the permission of the publisher. All rights reserved. No parts of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means including electronic, mechanical, photocopy, recording or otherwise, without written permission of the publisher. This publication contains general information only and the contributors are not, by means of this publication, rendering accounting, business, financial, investment, legal, tax or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser. Neither the contributors, their firms, affiliates nor related entities shall be responsible for any loss sustained by any person who relies on this publication. The views and opinions expressed are solely those of the authors and need not reflect those of their employing institutions. Although every reasonable effort has been made to ensure the accuracy of this publication, the publisher accepts no responsibility for any errors or omissions within this publication or for any expense or other loss alleged to have arisen in any way in connection with a reader’s use of this publication. This publication is based on the authors’ understanding of the structure of the arrangements detailed, the current tax legislation and HM Revenue & Customs practice as at April 2022 which could change in the future. It is not an offer to sell, or a solicitation of an offer to buy, the instruments described in this document. This material is not intended to constitute legal or tax advice and we recommend that prospective investors consult their own suitably qualified professional advisers concerning the possible tax consequences of purchasing, holding, selling or otherwise disposing of shares in potentially Business Relief qualifying companies. Intelligent Partnership is not authorised and regulated by the Financial Conduct Authority and does not give advice, information or promote itself to individual retail investors. It is the responsibility of readers to satisfy themselves as to whether any arrangement contemplated is suitable for recommendation to their clients. Tax treatment depends on an investor’s individual circumstances and may be subject to change. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.
Disclaimer
