Accredited by:
business relief
Industry Update - q2 2021
economic bounceback
regulatory news
what the managers say
market composition
tax planning demand
what's ahead
FIND INSIDE
INTRODUCTION
1
MARKET UPDATE
2
industry analysis
4
considerations for investment
3
MANAGERS IN FOCUS
5
WHAT'S
ON THE HORIZON
6
FURTHER LEARNING
7
The latest news, updates and statistics on BR
In partnership with:
Accredited by:
In partnership with:
business relief
Industry Update
q1 2021
The latest news, updates and statistics on BR
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
1. Introduction
Foreword
Opening statement
Update overview
Key findings
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
Foreword
Opening statement
Update overview
Key findings
1. Introduction
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
guy tolhurst
foreword
MENU
INTRODUCTION
Foreword
INTRODUCTION / FOREWORD
T
he second quarter of 2021 marked more steps back to economic normality for the UK, even if there were more than expected and a few side-steps and shuffles to cope with the now expected unexpected pandemic developments.
One of the welcome surprises was a continuation of the stronger than predicted economic growth which prompted upgrades to GDP growth forecasts and spurred on investment confidence. It has also given the chancellor more options in how to pursue repayment of the billions spent on measures to combat Covid-19. But nothing is certain.
Growth is a good thing, but not without its challenges, particularly to those whose outperforming investments and soaring house prices are pushing their estate values across the frozen IHT thresholds. While,
on the flipside, inflationary pressures threaten to undermine real spending power.
All of this signals new potential clients for Business Relief offers, as well as opportunities for Business Relief qualifying companies, driving new cash requirements to take the best advantage of them. On top of which, the government is moving forward apace with some of the regulatory changes it is now free to make in the wake of Brexit.
So this update considers some of the themes currently occupying the FCA and where they intersect with BR, how IHT receipts are already very much on the rise, and the outlook for IHT planning in the current context. That includes identifying the recent trends in BR investments including fees and performance, what BR investment managers have to say about the most promising investment areas right now and the regulatory changes they would like to see in the BR world.
The speed and flexibility of BR has certainly resolved more than a few planning headaches during the last 18 months of turmoil and we think that, as conditions continue to shift, it retains some very attractive features that can facilitate change, offer income and offset inflation. But, the only way to properly judge its appropriateness for your clients, is to stay fully up to date with what BR can do, the environment in which it operates and the client goals it might align with.
This publication is intended to help you do that, so please let us have any feedback you have to help us fulfill that aim. And please do share this update with your fellow professionals.
You might also be interested in our second edition of ‘A Professional’s Guide to Estate Planning’, including a Business Relief section.
I hope you find this Update informative and thought-provoking and
that it helps you to pinpoint the useful impacts BR can have in
today’s circumstances.
managing director,
intelligent partnership
For even more insights into the future of BR, sign up for one of our FREE BR Showcase events taking place in 6 locations across
the UK in September
BR
Showcase
3
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
foreword
managing director, intelligent partnership
guy
tolhurst
1. INTRODUCTION
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
MENU
INTRODUCTION
Foreword
INTRODUCTION / OPENING STATEMENT
s much as we like to think we have a good idea of what is coming next when it comes to the economic outlook or government policy, the truth is that, no matter how many papers we read or websites we view, we really don't know. However, if there's one thing that has shown us how some things are totally out of our control, it's Covid-19.
Having said that, good financial advisers don't just stop working because of uncertainty. Their clients rely on them most to help them navigate through difficult times and keep their plans and objectives firmly on track.
When it comes to later life financial planning, one of the main goals is to give clients the resources to handle anything that life throws at them. Not only does that require a thorough understanding of what those clients are looking to achieve, but it also demands a broad knowledge of the tools available that might help them to achieve it, including those that offer the flexibility that might be needed to withstand economic and social uncertainty .
We are currently lurching from a budget deficit that hit a peacetime high in the last financial year, to projected record economic growth this year and the spectre of rising inflation is making its mark for the first time in a decade or more. Projections for inflation are estimated to be in the region of nearly 4% by early next year and attempts to control it by the Bank of England are likely to require a rise in interest rates.
As always this will be a delicate economic and social balancing act.
So what should be in the plans of later life advisers who are currently plotting a course to the best outcomes for their clients in ten, twenty, thirty or forty years time?
Certainly an important and topical area which has a significant impact on both lifestyles in retirement and potential inheritances is that of care funding. The latest government announcement has captured headlines with the promise that no one will pay more than £86,000 for their care. At first sight this ‘cap’ looks to protect inheritance but as always the devil is in the detail. More announcements will be made about the exact system but already it is clear that for many people the actual figure will be double this or even more. This is a key time for advisers to help clients by guiding them through the changes and helping them not to be thrown off course with regard to their estate planning.
The best advice will include all the financial tools and options so as to ensure both certainty where possible and flexibility. For some clients Business Relief could certainly play a role in relation to inflation hedging but it’s not aimed at explosive growth, so will only offset the erosion of the value of clients’ money to a certain point. But it can ensure that investors retain access to their money if and when they need it in the future which will help with the flexibility needed for successful later life planning.
It can also provide a route to sustainable investments, with renewable energy being on many BR investment managers' buy lists. But these assets are increasingly popular, so those managers who are new to the party could be at a disadvantage. And for diversification purposes, renewables won’t be the only sector each is adding to client portfolios, so how much sustainability are those assets adding to the planet?
Then there is IHT. All indicators are that it is growing and there has been much discussion of big changes from an increase in the rate of IHT to wholesale changes to its structure. But we have to work with what we have and 100% IHT relief is not to be sniffed at, although neither are the risks of BR investments.
While nothing is certain, the best outcomes are achieved by those who consider all the options while doing their best to understand the context in which they are working. Business Relief is certainly one of the options that should be in the mix.
quote here
tish hanifan
Co Chair
Society of Later Life Advisers (SOLLA)
4
A
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
Aim Business Relief
Understanding IHT exposure
what the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC ICT Statistics Examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
opening statement
tish hanifan
Co Chair
Society of Later Life Advisers (SOLLA)
4
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
A
he second quarter of 2021 marked more steps back to economic normality for the UK, even if there were more than expected and a few side-steps and shuffles to cope with the now expected unexpected pandemic developments.
One of the welcome surprises was a continuation of the stronger than predicted economic growth which prompted upgrades to GDP growth forecasts and spurred on investment confidence. It has also given the chancellor more options in how to pursue repayment of the billions spent on measures to combat Covid-19. But nothing is certain.
Growth is a good thing, but not without its challenges, particularly to those whose outperforming investments and soaring house prices are pushing their estate values across the frozen IHT thresholds. While, on the flipside, inflationary pressures threaten to undermine real spending power.
All of this signals new potential clients for Business Relief offers, as well as opportunities for Business Relief qualifying companies, driving new cash requirements to take the best advantage of them. On top of which, the government is moving forward apace with some of the regulatory changes it is now free to make in the wake of Brexit.
So this update considers some of the themes currently occupying the FCA and where they intersect with BR, how IHT receipts are already very much on the rise, and the outlook for IHT planning in the current context. That includes identifying the recent trends in BR investments including fees and performance, what BR investment managers have to say about the most promising investment areas right now and the regulatory changes they would like to see in the BR world.
The speed and flexibility of BR has certainly resolved more than a few planning headaches during the last 18 months of turmoil and we think that, as conditions continue to shift, it retains some very attractive features that can facilitate change, offer income and offset inflation. But, the only way to properly judge its appropriateness for your clients, is to stay fully up to date with what BR can do, the environment in which it operates and the client goals it might align with.
This publication is intended to help you do that, so please let us have any feedback you have to help us fulfill that aim. And please do share this update with your fellow professionals.
You might also be interested in our second edition of
‘A Professional’s Guide to Estate Planning’, including a Business Relief section.
I hope you find this Update informative and thought-provoking and that it helps you to pinpoint the useful impacts BR can have in today’s circumstances.
update overview
INTRODUCTION / UPDATE OVERVIEW
We couldn’t do this without the help and support of a number of third parties who have contributed to writing this update. Their contributions range from inputting into the scope, sharing data, giving us their insights on the market, providing copy, and peer reviewing drafts.
So, a big thanks to: Dan Atkinson of Paradigm Norton, Jessica Franks of Octopus Investments, Tish Hanifan of SOLLA, Stephen Daniels, Henni Dovland and Simon Housden of TIME Investments, Kay Ingram of Ingram’s Insights, Stephen Jones of Clear Solutions Wealth & Tax Management, Denese Molyneux of Molyneu(x) Financial Planning, Gordon Pugh, Richard Simmonds and Dominique Butters of Blackfinch and Gillian Roche-Saunders of Adempi Associates. Their input is invaluable, but needless to say any errors or omissions are down to us.
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 and printing costs. So, a big thanks to Blackfinch, Octopus Investments and TIME Investments.
Business relief qualifying shares and share sales
Business Relief allows investors who hold Business Relief qualifying shares to sell those shares. As long as they purchase replacement Business Relief qualifying shares within three years of the sale, the two year BR qualification clock is not reset. As the examples of Earthport, WYG and PTSG show, there are examples where it may be worth investors considering earning an immediate windfall, which can then be reinvested in other options a manager considers better long term value. However, investors should be aware of the risk that, should they pass away in between an investment being sold and any replacement shares being acquired within the three year window, they would not be able to claim Business Relief
acknowledgements and thanks
Find out more at MANAGERS IN FOCUS
Readers can claim up to 2 hours’ structured CPD (excluding breaks).
By the end of the update readers will be able to:
•Identify the main developments and news in the Business Relief market.
• Outline how Business Relief sits within the current economic 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.
• Define the types of open Business Relief offers available on the market.
• Benchmark current products and providers against each other on key investment criteria
learning objectives for cpd accreditation
Find out more about claiming your CPD
5
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.
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
Aim Business Relief
Understanding IHT exposure
what the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC ICT Statistics Examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
update overview
acknowledgements and thanks
5
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
INTRODUCTION / KEY FINDINGS
55%
without a capital preservation strategy
open BR offers
0.22%
that abolishing BR would pay in 1 year
of Covid-19 cost
16
give preferential IHT treatment
to family-owned businesses
OECD member countries
62
average age people seek IHT advice from a professional
6%
in average IHT liability in 2018/19
increase
23
almost at 2020 + 2021 figure combined
AIM H1 IPOs
£1.5
April 2021
Q2 2021 vs Q2 2020
Increase in IHT receipts
33%
key findings
billion inflows into investment ISAs
6
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
Aim Business Relief
Understanding IHT exposure
what the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC ICT Statistics Examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
key findings
6
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
2. Market update
STRONG ECONOMIC BOUNCEBACK
BOOMING IHT RECEIPTS AND INFLATIONARY PRESSURES
regulatory news
aim business relief
Understanding IHT exposure
what the managers say
7
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
Aim Business Relief
Understanding IHT exposure
what the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC ICT Statistics Examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
2. Market update
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
STRONG ECONOMIC BOUNCEBACK
MARKET UPDATE / strong economic bounceback
Confidence in growth
The improved conditions led many commentators to revise up their 2021 UK GDP growth forecasts in Q2. Notably, the OECD upped its May forecast of 7.2% from March’s 5.1% and in June the Confederation of British Industry (CBI) announced its 8.2% projection, up from it’s previous 6.0% figure. In the same month, the British Chambers of Commerce (BCC) predicted 6.8%, and in May, the Bank of England (BoE) raised its estimate for UK GDP growth to 7.25%.
According to the CBI, this would mean it is back to its pre-COVID level towards the end of 2021, a year earlier than their previous forecast (in December 2020) expected. Even more encouragingly, in its August Monetary Policy Summary, the BoE also stated that," UK GDP is projected to recover further over the remainder of the year, reaching its pre-pandemic level in 2021 Q4.”
For 2022, the figures remain robust with average forecasts in July 2021 being 5.4% according to HM Treasury. If this were realised, it would be the third highest since 1968.
Of course all are caveated with the continued reopening of the economy and there are still concerns beyond the near term about a slower recovery for sectors hit hardest by the pandemic, the phasing out of government support and Brexit-related disruption. Hannah Essex, Co-Executive Director of the British Chambers of Commerce commented, “Beyond the immediate optimism, further action will be needed if we are to see a recovery which truly sustains itself and seizes the opportunity to rebuild and renew our economy.”
Business investment demands
Divergent projections here present a win-win scenario for BR. While the BCC forecasts business investment to rebound strongly in 2021 and 2022, with the help of the super-deduction incentive, the CBI warns that while the UK economy is set to recover to pre Covid-19 levels this year, business investment will remain 5% below pre Covid-19 levels. Both narratives indicate a need for increased funding to companies, and with IHT receipts growing, the incentivisation BR provides could be an important factor in driving up capital investment.
In the longer term, this imperative only looks set to strengthen as business investment is projected to slow sharply in 2023 as the super-deduction incentive ends and corporation tax increases.
Is there a window of opportunity for avoiding tax rises?
In May, the Times reported that, “Britain’s booming economic recovery will remove any need for further tax rises this parliament as Rishi Sunak is given a £20 billion growth windfall.” Having reviewed the BoE’s most recent growth forecasts, Andrew Goodwin, chief UK economist at Oxford Economics, which carried out the analysis, said, “the prospect of better growth has given him [Mr Sunak] more flexibility. Tax hikes should be off the table, certainly new tax hikes.” This would allow the government to fulfill its pledge to “end austerity”.
No more tax changes would create more certainty for businesses and investors. It would also leave BR free to continue unfettered with its job of driving funding into UK companies, particularly SMEs and protecting family businesses from large IHT bills. This could be just as well, since, while any possible changes could save the 0.04% of GDP that the tax relief costs annually, they might also have damaging unintended consequences for the SMEs and family businesses that are the backbone of UK plc.
However, while uncertainty reigns, clients would be well-advised to take the opportunity to consider their tax planning and make the most of the current reliefs and allowances.
Optimism for recovery
In our Q1 2021 Business Relief Update, we talked about palpable optimism nationwide in response to the prospects of the economy reopening in full thanks to the impact of the huge Covid-19 vaccination programme. And as far as economic performance is concerned, that optimism is proving to be well-placed, although the pandemic continues to generate uncertainty, with the Delta variant having caused hundreds of thousands of staff to self-isolate from mid-July when most Covid-19 restrictions on businesses in England were lifted.
Shop til you drop!
Pent up demand has been released, with high street sales in Q2 the best on record, according to the British Retail Consortium. Its figures show that retail sales were 13.1% higher in June this year than June 2019 and the total for the second quarter of 2021 was 10.4% up on the same three-month period of two years ago. The British Chambers of Commerce has suggested that consumer spending is expected to be the main driver of this year’s economic rebound, seeing the strongest growth since 1988.
The manufacturing and services sectors have seen upticks in output, forecast for 2021 to reach 8.5% and 6.3% respectively in 2021 and 2022 (BCC), as the UK economy continues to reopen following the Covid-19 lockdown earlier in the year, with the hospitality sector particularly strong. This has, in part, been assisted by a reduced rate of VAT being applied at 5% until 30 September 2021, after which a new reduced rate of 12.5% will be introduced until 31 March 2022.
What’s more, while driven during Covid-19 by government measures to stimulate the market, including a temporary stamp duty holiday, the 10% year-on-year growth in house prices (Land Registry’s UK House Price Index, May 2021) climbing property valuations look set to continue even after those measures end (the temporary tax-free threshold of £500,000 ended on 30 June and until 30 September, the threshold is £250,000, before returning to £125,000 from October). In July 2021, 'Which' reported that, although demand had jumped recently, new properties coming onto the market had not matched it. Mark Hayward of the estate agency group Propertymark told 'Which' that: “The market is experiencing a growing imbalance of supply and demand, and we see no indication that supply levels will increase. We firmly remain in a strong seller’s market which will impact house prices as buyers bid to secure their dream home.”
Add to this the positive performance of UK equities over Q2, with the FTSE Allshare giving a 5.6% return and the FTSE Small cap giving 9%. In fact, UK smaller companies outperformed larger counterparts.
Investor confidence has clearly returned, although the HL monthly investor confidence survey saw a 5% dip in July closely aligned with a new rise in Delta variant Covid-19 cases.
8
Source: FTSE Russel 30 June 2021
FTSE Q1 and H1 Performance 2021
Source: The World Bank
UK GDP Growth (percentage) 1961 - 2020
3 months
5.6%
5.7%
4.7%
5.5%
9.0%
6 Months
11.1%
10.9%
10.3%
10.8%
19.4%
FTSE ALL-ShaRE
ftse 100
ftse 250
ftse 350
ftse smallcap
2021 GDP Projections
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
Source: The World Bank
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
2021 GDP Projections
BOOMING IHT RECEIPTS AND INFLATIONARY PRESSURES
MARKET UPDATE / blooming iht receipts and inflationary pressures
9
Big increase in IHT receipts in H2 2020 and Q2 2021 highlights dangers of lack of IHT planning
Of course, to date, no tax increases have been implemented since the advent of Covid-19 outside those announced in the 2021 budget to freeze the nil rate and residence nil rate bands (NRB and RNRB), pensions lifetime allowance and CGT and income tax thresholds. But recent statistics show that IHT receipts are already rising sharply.
Strong economic growth, also suggests growing estate values and with the NRB already held for over a decade before the budget announcement to freeze it for another five years along with the RNRB, an increase in IHT liabilities is not surprising. But HMRC believes other factors are also at play when it comes to the £1.5 billion in IHT receipts received between April and June 2021, an increase of 33% or £400m from the same period in 2020.
Initial government analysis suggests that higher receipts in 2021, as well as in the second half of 2020, are as a result of higher volumes of wealth transfers that took place during the Covid-19 pandemic. Of course, any transfers of BR qualifying shares held for at least two years by the transferor even if they died within seven years of the transfer, would attract no additional IHT from the transferor's estate, as long as the transferee retained the shares until that death and they continued to qualify for BR.
Another consideration is that, if cash was required quickly to transfer to needy friends or relatives, access to it would have been possible, subject to liquidity, fairly speedily from BR investments. Although the resultant cash would have been subject to gifting rules and exposed to IHT. Such flexibility of access would not be available with most trust arrangements designed to remove assets from an estate for IHT purposes.
For more indepth review of the latest HMRC IHT statistics, see section 4 of this Update - Industry Analysis.
What does inflation mean for BR?
There has been much speculation recently about rising inflation and what level it could reach. The obvious concern for investors is the erosion this creates to the buying power of their cash and other assets whose value is not at least keeping pace with inflation.
The main drivers currently consist of a combination of consumer demand, cost pressures on UK firms resulting from Brexit-related supply chain issues as well as rising commodity prices alongside the economic revival, combined with wage pressures thanks to staff shortages linked to Covid-19 self isolation requirements, high numbers of workers still on furlough and a drop in the number of migrant workers (again connected to Brexit).
HM Treasury’s average of 15 independent Consumer Price Index projections for 2021 and 2022 at July 2021 resulted in forecasts of 2.9% and 2.0% for 2021 and 2022 respectively. The 2021 figure would be the highest since 2011, while the 2022 figure matches the BoE’s target rate. Nevertheless, in its August 2021 Monetary Policy summary, the BoE stated that, “CPI inflation is projected to rise temporarily in the near term, to 4% in 2021 Q4.” Although, “We expect inflation to fall back, reaching our target in around two years’ time.”
So higher inflation risks may persist, although at nowhere near some previous historical highs and the BoE is empowered to tighten monetary policy in an effort to limit rising inflation rates. Currently it is monitoring the drivers for more clarity before any decision on taking action.
BR investment managers typically target returns of around 3% - 4% with current average annualised returns, even after Covid-19’s worst impacts, of 3.34%. This provides some inflation hedging and is without taking into account the 40% IHT relief BR offers.
Even better, renewable energy, a popular sector in BR investment manager portfolios, often benefits from feed-in tariffs which are index linked to the Retail Prices Index (RPI).
For more specific information on current target and actual returns in the BR market, see Section 3 of this update, Considerations for investment.
In its 2021/22 Business Plan, the FCA has stated that one of the outcomes it wants to achieve in relation to "enabling consumers to make effective financial decisions", is that, "More consumers who want to save long-term consider investment opportunities. We expect to see fewer consumers who have a higher appetite for risk holding over £10,000 in cash". One objective here is to encourage individuals to grow and protect their asset values in order to cover their own costs in later life. In this context, BR could be a great investment home for those looking to grow funds for later life with one eye on inflation and IHT efficiency, although the lower risk options including pensions contributions should obviously be carefully considered, where available.
BR investments can cash in on ISA popularity
The Investment Association (IA) reported a big jump in inflows into funds wrapped by ISAs in March (over £750 million) and particularly April with £1.5 billion, £79 million more than the previous 12 months' total. While the May figure shrank back to just under £300 million, this is still more than any month since May 2020.
IA CEO Chris Cummings commented: "Savers have once again shown the appeal of ISAs in helping to get into the savings habit and build up a retirement nest egg. Comparing the strong ISA flows this April to the year before shows investors have been moving money into funds to make the most of tax incentivised savings and to deliver better returns amidst low interest rates on cash savings."
This is another positive from a BR perspective, bearing in mind BR-qualifying shares can be held within a stocks and shares ISA, giving access to a triumvirate of tax reliefs in the shape of 100% income tax, capital gains tax and IHT relief.
- Jessica Franks, Head of Tax, Octopus Investments
After a prolonged period of market uncertainty due to Brexit and Covid-19, investor confidence is returning to the Alternative Investment Market, presenting it with the opportunity to lead the UK’s economic recovery.
Source: The World Bank
Historic UK inflation rate
- MARCUS STUTTARD
In the last 12 months, the Treasury collected £5.698 billion from UK taxpayers, making it the largest take in any 12-month period
BoE UK INFLATION RATE PROJECTION
Source: Bank of England
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
REGULATORY NEWs
MARKET UPDATE / regulatory news
FCA depreciation notification rule abolition moving forward
10%
10
July 2021 memorandum to parliament saw the government revoke the requirement for investment portfolio managers to notify professional and wholesale clients of any drop in value of their portfolio by 10% or more no later than the end of that business day. Instead, those investors and investment managers will be allowed to agree what reporting is appropriate based on their specific circumstances.
For retail clients, a consultation has been promised.
The rule, which applies to BR managers, is set out in COBS 16A.4.3, is currently suspended until the end of 2021 where investment managers have notified retail clients:
At least once of a portfolio value drop of at least 10%,
That they may not receive another such notification in the current reporting period,
Directed them to where they can view general updates on market conditions, and
Reminded them of how to check their portfolio value.
The rule has been roundly criticised by investment managers and advisers alike and has the potential to drive bad outcomes by upping panic among investors. Consequently, there is likely to be strong support for scrapping the rule for retail investors.
• Poor due diligence, resulting in the fund manager’s lack of knowledge to adequately understand the funds operating in their name, a lack of effective challenge from fund managers to proposals and information from delegate third party managers, little in-depth analysis of the delegated third-party investment managers’ expertise, track record or investment process, and poor levels of analysis of how the investment manager aims to achieve stated performance targets.
• Poor oversight of delegated investment managers and funds resulting in the third-party manager being in a position to make decisions to the detriment of investors, provide information to customers that is not fair, clear or misleading or leave the manager ill-informed about how the third party manager’s plans to produce returns are performing.
• Governance procedures not robust enough to identify risks and potential conflicts of interest with third-party managers and challenge decisions where appropriate. If a robust risk framework is not in place, it will be difficult to identify if the firm or its third-party manager is operating outside of its risk tolerance and the risk profile communicated to investors.
Positive attributes displayed by managers that operate a host model effectively
• Well capitalised, having assessed their risks and the harm their activities may pose and the resources they need to operate throughout the economic cycle.
• Senior management can demonstrate good governance throughout the organisation, supporting a clear purpose and strategy.
• Well resourced with systems, staff and expertise, including relevant asset management experience for overseeing delegated third-party investment managers.
• Senior management clearly recognises and controls the conflicts of interest inherent in the business model.
• They hold their delegated third-party investment managers to account to achieve fair results for investors.
• They are prepared to make decisions in the interest of the schemes they operate and of investors, disregarding the impact on their business.
A
FCA review of host authorised fund management firms
This Review relates only to managers of “authorised funds” and there are no BR funds which have been authorised by the FCA. However, the stance the regulator is taking regarding the authorised fund managers (AFMs) that delegate investment management to third parties outside of their corporate group certainly confirms the FCA’s expectations to the small number of BR managers that use this model.
Gillian Roche-Saunders, founding partner of compliance firm, Adempi Associates, said, “More and more we are seeing scrutiny of delegated arrangements, from appointed representative arrangements to host fund managers. This review of host AFMs contains pertinent detail for any investment firms offering or selecting third party fund management services who want to get ahead of the curve. It really sets out the regulator’s thinking on what they expect when responsibility for fund management is taken on by a third party.”
The Review, published in July, considers findings from visits to a sample of host AFMs in Q4 2019 to Q4 2020, looking at the effectiveness of their governance, controls and monitoring. While there was positivity in the identification of best practice in firms that operate a host model effectively, the work also highlighted some weaknesses on the part of host AFMs, including how they managed conflicts of interest in their relationship with investment managers.
Potential issues where not all of these positive attributes are displayed
These themes are something for advisers to be aware of in terms of the read across to BR offers. The relevant BR managers will also be very likely to ensure they sit nicely within the governance boundaries that the FCA is highlighting, not just to avoid regulatory issues, but also to ensure that operational risks and any potential knock-ons to investors are limited.
According to Gillian Roche-Saunders, “At the heart of the FCA’s suggestions are two key messages. Hosts need to have a clear focus on the interests of the investors, even if this comes at a cost to the commercial benefit of any firm involved in delivering the service. Connected to this, it is essential that there is infrastructure in place that truly enables the host to competently take full responsibility for the best interests of those investors.”
There are also parallels to the work the FCA is doing on raising standards where firms offer appointed representative relationships and to firms that sign off financial promotions belonging to other firms (also known as Section 21 approvers). So, the direction of regulatory travel is very much towards greater scrutiny where delegation of authorised activity takes place.
PRIIPs consultation underway
The government has wasted little time in setting about amending PRIIPs. As we mentioned in the Q1 BR Update, HM Treasury has already outlined the three initial changes it intends to make to the UK PRIIPs regime and provisions designed to facilitate them and further amendments have already passed into law in the Finance Act 2021.
This was followed in late July by the opening of an FCA consultation: CP21/23: PRIIPs - Proposed scope rules and amendments to Regulatory Technical Standards. The reasons the FCA gives for the consultation are fairly scathing: “Our proposals aim to address the areas of the Regulation that pose the most harm to consumers. We want to address the lack of clarity on the PRIIPs scope and address concerns with performance scenarios, summary risk indicators and elements of the transaction costs methodology.”
One of the regulator’s proposals is to remove performance scenarios from KIDs because of the complexity of producing an obligatory, single performance calculation that works well to provide reasonable potential return scenarios for the wide range of products governed by PRIIPs. Instead, as an immediate remedy, PRIIPs manufacturers would be required to provide other types of information on performance.
PRIIPs manufacturers would be required to describe, in narrative form:
The factors likely to affect future performance, including those most likely to determine the outcome of the investment and those which could have a material impact on its performance.
The most relevant index, benchmark, or target, and how the PRIIP is likely to compare in terms of performance and volatility.
An explanation of a favourable, negative, or worst scenario for how the investment performs.
Respondents are asked if they agree with this narrative proposal regarding performance in the KID and whether the FCA should specify the factors that the narrative should cover.
In relation to inappropriate risk scores, the FCA proposes the introduction of a requirement for PRIIPs manufacturers to upgrade their product’s Summary Risk Indicator (SRI) score if they consider that the risk rating produced by the methodology is too low, with relevant reporting to the regulator to explain any increase.
The consultation closes on 30 September 2021.
- MARCUS STUTTARD
This review of host AFMs contains pertinent detail for any investment firms offering or selecting third party fund management services who want to get ahead of the curve.
- gillian Roche-Saunders, founding partner, Adempi Associates
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
MARKET UPDATE / aim business relief
11
AIM BUSINESS RELIEF
T
he AIM market experienced another strong quarter with another 13 companies admitted to AIM raising £664m. This is the third quarter in a row of positive IPO numbers bringing the H1 total to 23, already a significant improvement on the full years of 2020 and 2019 when 16 and 10 IPOs respectively took place.
Follow-on fundraising by existing issuers saw 542 further issues in Q2, in keeping with the robust numbers posted in Q1 2021 and Q4 2020 and offering plenty of scope for potential investee opportunities to be brought to the attention of BR managers.
Q2 also saw AIM’s biggest ever listing with Victorian Plumbing Group PLC raising £298 million, with a market capitalisation of £850 million. This confirms the attractiveness of the market for larger players and potentially extends the choice of very well capitalised and stable investees for BR managers.
Overall performance in the quarter was relatively steady and the FTSE AIM All-Share index was between 1209 and 1248 in April, May and June.
For more in depth analysis of the AIM market, see our next AIM update, due for publication soon.
- MARCUS STUTTARD
This is the third busy quarter in a row for the UK markets, with high levels of activity on both the Main Market and AIM and there appears to be no let-up in activity in sight for the remainder of 2021.
- Scott McCubbin, EY UKI IPO Leader
Source: London Stock Exchange, 28 July 2021
FTSE AIM All-Share index
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
henny dovland
thought leadership
understanding iht exposure
MENU
INTRODUCTION
Foreword
MARKET UPDATE / THOUGHT LEADERSHIP
A
lmost a third of over-55s have never checked how Inheritance Tax could affect them.
A new study by TIME Investments, a leading provider of Inheritance Tax services, shows nearly one in three (31%) over-55s have never checked how Inheritance Tax (IHT) could affect them despite 36% estimating their estates are worth more than the current tax-free allowances.
IHT receipts received by HMRC during the tax year 2020/2021 were £5.4 billion, an increase of 4% (£190 million) on the tax year 2019/2020, according to government figures. Furthermore, the recent Budget decision to freeze both the nil-rate and residence nil-rate bands until April 2026 is estimated to raise an additional £985 million in the next five years.
However, TIME Investments’ nationwide study shows more than half (52%) of over-55s do not know what their IHT liability could be. A prudent 25% say they are aware of their potential liability while another 23% are confident they won’t have any IHT to pay.
The research revealed that 36% of over-55s estimate their estate would be worth more than £325,000 – the current nil-rate band – and 20% estimate that the value is worth more than £500,000 which is the current allowance with the residence nil-rate band.
Property wealth is the biggest contributor of the overall estate, the research found. Around 31% of over-55s say their house is worth more than £325,000 compared to 24% of the population as a whole.
Perhaps of most concern, around 28% of over-55s say they don’t have a will in place. One of the first steps in IHT planning should be to establish a will to make sure that clients can choose who inherits their assets.
Tools to help assess exposure to Inheritance Tax
TIME Investments has created a simple online calculator to forecast a client’s potential future IHT liability. The calculator can be a great tool to open up conversations with clients about later life planning and establish whether they currently have an IHT liability or could have one in the future.
TIME’s IHT calculator factors in the current values and projected growth rates of a client’s property, investments and cash. You can then select the available nil-rate band and residence nil-rate band allowances, which have been updated to reflect the current freeze.
Once you have established whether your client has an IHT liability, you can choose to show the potential tax savings that a Business Relief investment could offer after just two years.
To try the IHT calculator for yourself please visit ihtcalculator.com.
Many over-55s will have estates worth more than the current IHT allowances and it is a good first step to check what impact IHT could have. The Budget freeze on IHT allowances until 2026 will inevitably mean more people are likely to face tax bills and it makes sense to start planning as soon as possible.
business development director
time investments
time-investments.com
020 7391 4747
questions@time-investments.com
contact
12
1
2
3
4
1. Research conducted by independent market research company Consumer Intelligence among 1,019 UK adults aged 18-plus between February 19th and 22nd 2021
2. Inheritance tax statistics: Table 12.1 - analysis of receipts’, July 2021 https://www.gov.uk/government/statistics/inheritance-tax-statistics-table-121-analysis-of-receipts
3. Budget 2021: Policy costings’, March 2021 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/965777/Budget_2021_policy_costings_.pdf
Important information
For professional advisers only. TIME Investments is a trading name of Alpha Real Property Investment Advisers LLP and is authorised and regulated by the Financial Conduct Authority. The levels and bases of, and reliefs from, taxation may change in the future. Any favourable tax treatment, such as Business Relief, is subject to government legislation and as such may change. The information contained in this article does not constitute and should not be construed as constituting investment or any other advice by TIME.
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
thought leadership
The growing need for Inheritance Tax planning
henny dovland
1. Research conducted by independent market research company Consumer Intelligence among 1,019 UK adults aged 18-plus between February 19th and 22nd 2021 2. Inheritance tax statistics: Table 12.1 - analysis of receipts’, July 2021 https://www.gov.uk/government/statistics/inheritance-tax-statistics-table-121-analysis-of-receipts 3. Budget 2021: Policy costings’, March 2021 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/
attachment_data/file/965777/Budget_2021_policy_costings_.pdf
time-investments.com
020 7391 4747
questions@time-investments.com
contact
business development director
time investments
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
what the managers say
2021 has seen strong economic growth as we head closer and closer to post-Covid-19 reality. How has that impacted your BR service?
We temporarily saw a slight levelling off of growth in 2020 and have seen a corresponding return to strength this year. The lending companies now have stronger provisions built in and our energy company is benefiting from higher power prices as global demand increases. Our service aims to be resilient to crises while still benefiting from economic growth.
The FCA has been busy with a number of consultations and policy papers setting out its thoughts and new rules in areas such as ESG, productive finance, investment firms prudential regime and proposals on high risk investments and retail investors’ access to them. What negatives and positives do you see for BR in the recent flurry of activity from the regulator?
Some providers may struggle to keep up with the rapid changes, especially where their products or practices have historically been out of line with new regulations. However, any regulation which better aligns investment practice with clients’ interests creates more confidence in the market for investors, which should be a boost for the overall industry. Blackfinch strongly believes in continuous adaptation.
Has the volatility we’ve seen over recent months settled to pre-Covid-19 levels for your investees?
During Covid, our lending companies recognised provisions against their loan books, which caused a temporary reduction in share-price growth, but did not experience the large swings witnessed in listed markets. Energy markets saw larger falls but we were not exposed to short-term power prices or the capacity market so could deliver more stable performance than companies dependent on short-term prices.
Richard Simmonds
Chief Investment Officer
Blackfinch
2021 has seen strong economic growth as we head closer and closer to post-Covid-19 reality. How has that impacted your BR service?
The first half of 2021 started slowly but progressed well as covid-19 restrictions on social distancing continued to be relaxed. Improved fundraising for our unquoted investments and quoted investments gives a clear indication of the challenges advisers have faced, particularly in our sector often working with a vulnerable client base.
What negatives and positives do you see for BR in the recent flurry of activity from the regulator?
The FCA has an immense responsibility regulating the financial markets and ensuring consumers are afforded the best possible protections. Any review of current regulations will be being done in support of this. Octopus is fully in favour of any changes or enhancements which make sure the right products are used to solve the right problems for the right investors.
Has the volatility we’ve seen over recent months settled to pre-Covid-19 levels for your investees?
We operate two distinct products that invest into BR qualifying companies. The Octopus Inheritance Tax Service targets long term predictable growth and invests in unquoted companies which are uncorrelated to quoted markets therefore has not been impacted by market volatility. The Octopus AIM Inheritance Tax Service targets a higher level of growth by investing in companies on AIM. AIM, like all quoted markets carried inherent volatility as prices are driven by market sentiment. As long-term investors, market volatility isn’t always a concern for us. Actually, it can present valuable buying opportunities.
jessiCa franks
Head of Tax
Octopus Investments
2021 has seen strong economic growth as we head closer and closer to post-Covid-19 reality. How has that impacted your BR service?
We have seen strong fundraising inflows this year, which have been back up to pre-Covid levels. TIME:Advance has continued to deliver performance in line with its target return of 3% - 4.5% p.a. throughout the period, with no loan impairments or decrease in the carrying value of our trading assets.
What negatives and positives do you see for BR in the recent flurry of activity from the regulator?
We welcome increased scrutiny on BR providers and services as these types of investments are considered high risk by the FCA. We have always gone above and beyond to provide our investors with transparency, particularly around how we value our assets. More widely across investments there are concerns about ‘green washing’ so an introduction of a framework by the FCA to demonstrate ESG credentials would benefit the industry as a whole.
Has the volatility we’ve seen over recent months settled to pre-Covid-19 levels for your investees?
We have always had a very conservative investment strategy for TIME:Advance and we seek high-quality assets, which are mostly long-term, cash flow driven and asset-backed, meaning they are not exposed to the same forces that led to volatility across global markets.
We limited the number of secured property loans we provided at the height of the Covid pandemic in 2020 and lowered the maximum LTGDV (loan to gross development value) we would lend from 65% to 55% to mitigate risk for our investors; however, we are now back to pre-Covid levels of lending as the property market continues to go from strength to strength.
stephen daniels
Head of Investments
TIME Investments
MARKET UPDATE / WHAT THE MANAGERS SAY
13
So how are the managers feeling about the BR market and overall investment market conditions?
Here's what they have to say.
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
So how are the managers feeling about the BR market and overall investment market conditions? Here's what they have to say.
what the managers say
13
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
3. Considerations
for Investment
market composition
fees and charges
14
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
3. Considerations
for Investment
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
market composition
CONSIDERATIONS FOR INVESTMENT / MARKET COMPOSITION
his 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 12 August 2021.
Inflows
Inflows of investment funds into non-AIM BR services since April 1 2021 are at just under £434 million. If we extrapolate the same proportion of BR investment raised overall in proportion to the number of AIM and non-AIM offers currently open (47% non-AIM and 53% AIM), we can assume that total inflows in April, May, June, July and the first half of August were just under £1 billion.
That is a fairly significant sum targeted at UK companies with funding needs.
Open offers
At 12 August 2021, there were 64 open Business Relief offers, one less than in mid May, showing that the market for BR offers is currently very stable. This is also reflected in the lack of substantial changes in the data for underlying assets from the mid May analysis.
Investment strategy
Bearing in mind the nature of BR investments, advisers and investors might not anticipate that there is a lower proportion of open BR offers with capital preservation as part of the investment strategy than the proportion without it: 45% seek capital preservation and growth or capital preservation and income, while 55% aim for growth or growth and income.
Clearly, the choice will be very much dependent on the personal circumstances of the investor, but this is a very important distinction for those looking for a more conservative investment approach to their hard-earned capital.
Target returns
August 2021 saw the average target return for BR offers focusing on private companies, rather than AIM quoted investees, drop to 3.63%.
The following analysis on target returns looks at non-AIM Business Relief offers, where performance data can be more reliably mapped since the vast majority of AIM BR offers do not publish a target.
The continuing trend is for more conservative targets, and something that may be having an impact here is adjustments being made to take account of the increases due to take place to corporation tax from April 2023. This will clearly be an ongoing cost that could dent growth and investor returns.
While this is not a positive indicator for investors, one key statistic - the most common target return - has remained consistent for some time: In 2017, 2018 and 2019, this was at 3%. It is currently at 3% for non-AIM offers.
Annualised returns since inception
There is better news for actual returns as the annualised average since inception has pushed up. This could signal the improvements in renewable energy prices and increased activity in SME and secured lending filtering through to actual figures.
underlying assets
- B
quote
AIM vs Non AIM
The open BR offers consist of 34 that are AIM-focused and 30 that invest in private companies. As AIM continues to perform strongly, it is perhaps unsurprising that more AIM BR managers are raising cash to invest into promising AIM constituents.
40%
energy
media
10%
sme lending
16.7%
property
26.7%
general enterprise
6.7%
There are no surprises, with all AIM-focused BR offers taking a General Enterprise approach. They are joined by one non-AIM BR offer with a General Enterprise strategy as was the case in May. The non-AIM offers focus on a range of asset-backed trading activities, many with a main focus area as well as a small number of other targets for underlying assets as diversifiers. So, for example, an offer might concentrate most of its funds on solar energy, but also have interests in secured lending and forestry.
Energy remains the most popular investment sector, with the main concentration on renewables including solar and wind, but also less well known options such as anaerobic digestion, reserve power and battery storage. The recent and alarming ‘Climate Change 2021: the Physical Science Basis’ report from the UN’s Intergovernmental Panel on Climate Change (IPCC) called climate change as a result of CO2 emissions, “widespread, rapid, and intensifying.” Given what the IPCC says about, the urgent need for, “strong, rapid, and sustained reductions in greenhouse gas emissions, and reaching net zero CO2 emissions,” the drivers for renewable energy are only growing.
SME and secured lending are also favoured by many BR managers and while this trade was overshadowed by the government support schemes to help businesses through Covid-19’s lockdowns, as those schemes wind up, there is likely to be a surge in demand. Research from law firm, Walker Morris, suggests that 40% of SMEs have plans to grow over the next 12 months, although many are likely to face barriers with traditional lenders. Talking to Business Leader magazine, James Crellin, Director in the Finance Group at Walker Morris, said: “Alternative finance is arguably the key to helping the economy get back on its feet and grow following the challenges businesses, particularly SMEs, faced during Covid-19.”
4.31%
4.14%
3.88%
3.34%
january 2020
july 2020
may 2021
august 2021
Average target return
march 30 2020
29
27
july 1 2020
31
31
may 2021
34
31
current aim offers
current non-aim offers
M
15
*Data from 17 of the 28 non-AIM offers for which there was data at 30 March 2020
**Data from 22 of the 31 non-AIM offers for which there was data at July 2020
***Data from 22 of the 31 non-AIM offers for which there was data at 13 May 2021
****Data from 23 of the 30 non-AIM offers for which there was data at 12 August 2021
T
august 2021
34
30
3.77%
3.52%
3.26%
3.34%
march 2020*
july 2020**
may 2021***
august 2021****
Average annualised return since inception
53.1%
46.9%
asset-backed
AIM Listed
open offers by investee company type
All data has been obtained from the MICAP platform, unless otherwise stated. MICAP offers IFAs and other financial professionals a platform to conduct due diligence on tax advantaged funds, of which there were 64 focused on Business Relief at the time of writing.
How do we use MICAP?
Underlying investment sectors: Non-AIM open BR offers
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
market composition
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
fees and charges
CONSIDERATIONS FOR INVESTMENT / FEES AND CHARGES
Initial Charges (open offers)
The recent evolution of Initial charges shows a slight drop in favour of investors and investees. Considering the lower average target returns on offer, this seems reasonable.
Some managers do not charge an initial charge, but do have an initial deal fee for the acquisition of the shares in the underlying companies. For August 2021, this pushes up the average upfront charge to 1.65% vs the 1.7% recorded in May.
The overall drop is fueled by a combination of slightly lower initial charges in both AIM and non-AIM offers.
In the AIM fees, it is interesting to note the reduced effect of the initial deal fee on overall upfront charges. This is connected to a drop in the average initial deal fee for AIM BR investors from 0.36% to 0.29% which follows a general trend of declining AIM fees as is reflected in the wider market, where the costs associated with mainstream funds have also fallen.
In terms of non-AIM initial charges, perhaps as a response to the difficulties faced by SMEs, close to a quarter of what was previously payable by investees has now been shifted over to investors.
Data provided by MICAP
deep dive into fees and charges
Annual Management Charges
Some managers do not charge an annual management charge (AMC), but do have ongoing trading costs when there is divestment and reinvestment. For August 2021, this pushes down the average annual charge to 1.56% vs. 1.61% recorded in May 2021.
The marginal decrease in annual fees is driven largely by non-AIM offers, with a drop in AMC charged to investees without a corresponding increase to investors. As seen in the initial charges, this again suggests removing some of the cost burden from SMEs.
The impact of ongoing trading costs which encompass managers’ operational costs, is notably higher where non-AIM companies are the investees. Of course, AIM BR managers are likely to have little or no opportunity to apply these to the AIM quoted companies they buy into and non-AIM companies could well be much smaller and less developed than their BR-qualifying AIM counterparts. And with private companies, managers are likely to have opportunities to sit on boards and have meaningful input into their running for which they expect to be remunerated.
performance fee
annual performance fee
20%
annual performance hurdle
20%
15%
30%
4%
5%
5%
10%
20%
4.5%
br offer 1
br offer 2
br offer 3
br offer 4
br offer 5
br offer 1
br offer 2
br offer 3
br offer 4
br offer 5
jul 2020
1.00%
0.35%
1.33%
may 2021
1.02%
0.33%
1.32%
to investor
(exc. adviser fee)
to investee
total initial charge
average initial charges
to investee
0%
0%
total
0.40%
0.41%
aim
avg aug 2021
avg may 2021
aim vs non-aim
to investor
0.42%
0.44%
jul 2020
0.92%
0.36%
1.27%
may 2021
0.91%
0.38%
1.26%
to investor
to investee
total AMC
average annual management charges
2019
0.98%
0.32%
1.26%
mar 2020
0.92%
0.31%
1.18%
16
If we add the initial deal fee, the average total upfront charge is 0.69% vs. 0.84% recorded in May
aug 2021
0.98%
0.27%
1.23%
to investee
0.58%
0.77%
to investor
1.58%
1.41%
total
2.17%
2.18%
non-aim
avg aug 2021
avg may 2021
If we add in the initial deal fee, the average total upfront charge is 2.73% vs. 2.77% recorded in May.
aug 2021
0.89%
0.39%
1.25%
to investee
0%
0%
to investor
1.28%
1.30%
total
1.28%
1.30%
aim
avg aug 2021
avg may 2021
aim vs non-aim
If we add ongoing trading costs, we arrive at total annual average charges of 1.32%
to investee
0.85%
0.92%
to investor
0.41%
0.42%
total
1.21%
1.28%
non-aim
avg aug 2021
avg may 2021
If we add ongoing trading costs, we arrive at total annual average charges of 1.84%
Total avg initial charge without initial deal fee
1.23%
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
fees and charges
16
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
4. Industry analysis
hmrc iht statistics examined
oecd's view on iht
SCENE IS SET FOR GREATER IHT TAX PLANNING DEMAND
17
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
4. Industry
analysis
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
HMRC IHT STATISTICS EXAMINED
INDUSTRY ANALYSIS / hmrc iht statistics examined
B
ecause of the lag in collection and reporting of IHT, HMRC’s latest full statistical analysis is on the 2018/19 tax year, although there are some figures available for 2020/21.
Both the percentage and number of UK deaths resulting in an IHT charge fell in 2018/19, by 0.2% and 2,100 (9%) respectively, leaving 22,100 (3.7%) estates with an IHT liability. HMRC attributes this to the phased introduction of the residence nil rate band (RNRB) which increased from £100,000 in 2017/18 to £125,000 in 2018/19. (In 2019/2020 the rate went up again to £150,000 and in 2020/21 it moved to £175,000 per individual, where it has been frozen until 2026).
In 2018/2019, 19,100 estates used the RNRB threshold, and £3.6 billion of chargeable estate value was sheltered from an IHT charge as a result. This was a rise of £0.5 billion compared to the tax year 2017 to 2018 when an additional 300 estates used the RNRB threshold. This suggests that, on average, larger estates used the RNRB in 2018/19.
Since the 2017/18 introduction of the RNRB filtered through to tax reliefs in 2019/20, we can assume that the claims made in 2018 impacted receipts in 2020/21. However, despite these ongoing increases to the RNRB, IHT receipts rose by 4% to £5.4 billion between 2019/20 and 2020/21. This is second only to the record 2018/19 figure and only by £33 million. Three questions are interesting here:
1) Will the size of estates using the RNRB continue to grow?
2) Will the additional £25,000 of RNRB available in 2019/20 and the additional £50,000 available in 2020/21 be enough to reduce the number estates subject to IHT further?
3) Will either of these factors be sufficient to stop IHT receipts from rising in those years?
Given the evidence of 2017/18 to 2018/19, the answer to question three may be that it seems unlikely and bearing in mind the freezing of the RNRB, NRB and pensions Lifetime Allowance, the same answer might be expected for question two.
18
IHT Receipts and Proportion of UK Deaths resulting in IHT
Source: HMRC
The figures show that estates up to £1 million in value make up 96% of estates filing IHT accounts but account for just £71.2 billion which equates to less than 20% of the total tax paid. Of that, the majority, £41.6 billion, was held in UK residential buildings. This evidences the power of residential property on estate values, despite the RNRB. As we have seen, the ongoing increases in house prices, including the most recent spikes are already fueling an increase in future IHT receipts.
Both exemptions claimed on transfers between spouses and civil partners and those claimed on transfers to qualifying charities, the top two exemptions by value, dropped in 2018/19. By contrast, the value of BR claimed went up by £354 million, giving a total of £2.53 billion and topping the previous record of £2.29 million of 2014/15. Relief on unquoted shares matched the 2014/15 record of £1.72 billion, while this was over double the £813 million claimed for other BR including AIM quoted shares.
Taking into account that BR has been in existence since 1976 and AIM shares only became eligible for BR in August 2013, it is hardly surprising that claims for the relief have consistently been made in greater amounts in relation to totally unlisted shares. The value of AIM related claims has grown, although fairly unevenly as it is obviously impacted by the year of death as well as by growing holdings of BR qualifying AIM shares.
In its 2020 IHT statistical analysis, HMRC puts the drop in the amount claimed from 2015/16 to 2016/17 down to the 25% decline in AIM valuations in 2015/16. 2017/18 was a much improved year for AIM and 2018/19 was a more difficult year when AIM experienced major struggles before making a good recovery in 2019.
In terms of the surge in BR claims against unlisted shares in 2017/18 and 2018/19 back to similar levels as 2013/14 and 2014/15, data from the Office of National Statistics (ONS), shows that this might not be as much of a jump as it first appears. The number of deaths in the UK of those over 50 (the age groups in which BR investing might reasonably be expected) in the calendar years 2013, 2014 and 2015 were 259,533, 259,047 and 273,161 respectively.
But in 2017, 2018 and 2019, the figures were 279,385, 284,315 and 282,113 respectively. So, with several thousand more deaths each year and the value of claims in 2017/18 and 2018/19 still slightly lower than the value of claims in 2013/14 and 2014/15, the suggestion is that proportionately, the amounts claimed in the later years were smaller or fewer of those who died were in a position to claim.
HMRC states that, “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 until the tax year 2017 to 2018, where it increased by 10% (£18,000) to £197,000. Similarly, the average liability increased by 6% (£12,000) in the tax year 2018 to 2019 to £209,000. In both years, while the total tax charge levied on taxpaying estates fell slightly, the number of taxpaying estates fell by much more. This meant that those estates which were taxpaying paid a higher average tax charge compared to previous years.”
This suggests that those estates that are pulled into the IHT net can expect an increasing liability and tax planning should cover all legitimate methods of mitigation.
Proportion of BR claims since 2013/14 (£m)
13/14
1,440
551
1,990
72/28
YEAR
unquoted shares
other BR (INCLUDING AIM)
total
% proportion
14/15
1,720
570
2290
75/25
15/16
936
660
1600
59/41
16/17
828
417
1,250
67/33
17/18
1,360
869
2,220
61/39
18/19
1,720
813
2,530
68/32
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
OECD’S VIEWS ON IHT
INDUSTRY ANALYSIS / oecd's view on iht
I
n May, the Organisation for Economic Co-operation and Development (OECD) weighed in with its thoughts on IHT across a range of nations with a report exploring the role that inheritance taxation could play in raising revenues, addressing inequalities and improving efficiency in OECD countries.
While the OECD is not a statutory body in the UK, as a respected, 60-year-old group of 38 member countries that discuss and develop economic and social policy, its influence is not insignificant. Its findings present an interesting review of what some countries do differently to the UK as well as a spotlight on some of the peculiarities of the UK’s IHT regime.
Levelling up is a much-hyped government objective and the OECD points out that reform to the current system could go some way to achieving it. The view is that, “Inheritances are also unequally distributed across households, with wealthier households reporting more and higher-value inheritances.” Indeed, HMRC figures show that higher value estates are more likely to consist of securities and other assets, which attract reliefs like BR. They are also more likely to have been able to afford expert advice on IHT planning strategies.
Nevertheless, the levelling up agenda is fraught with difficulties. For example, the OECD’s publication includes a section titled, “Inheritance taxes can help prevent the build-up of dynastic wealth,” but this would seem to be a substantial disincentive to family businesses and those family members looking to grow them. Since family businesses were found to contribute almost 30% of the UK’s national income in 2019 (IFB Research Foundation, June 2021) and given the huge economic blow delivered by Covid-19, this certainly doesn’t seem like the moment to discourage this business sector.
In fact, from a purely entrepreneurial perspective, this could be viewed as somewhat counter-intuitive as many starting out in any kind of business are driven by what they can earn for the benefit of their families as much as anything else.
This is where some tax experts think OECD recommendations that centre on reducing exemptions may find greater consideration from the UK powers that be, including Business Relief. But the additional amounts that this would bring to the Treasury and taking into account BR’s role in driving growth funding to both AIM and private UK companies, seems relatively small; HMRC reported that in 2019/20, the cost of BR as a share of GDP was just 0.04% or £815 million. That is the equivalent of just 0.22% of the cost of Covid-19 measures, estimated at £372 billion by April 2021 by the National Audit Office.
Speaking to ‘International Investment’ in July 2021, Richard Bull, private clients partner at Crowe, stated that alterations to BR, “could increase the IHT take by circa 10% but a total withdrawal of the relief would hit family owned businesses the hardest given the lack of liquidity usually inherent with such shareholdings." 10% of IHT currently equates to around £540 million, but this would remove or reduce the significant funding source of around £2 billion per year to UK businesses provided by BR investors (inflows to BR offers), as well as exposing the crucial family business sector to substantial risk.
Then there is a question mark against what it would mean for Chancellor Sunak’s ‘investment-led recovery’ if major changes to BR reduced the drivers of private investment into UK business. In addition to which, Edward Troup, former first permanent secretary at HM Revenue & Customs made a shrewd observation when he said, “In government you should only embark on serious tax reform if you can raise serious money.”
The argument that inheritance taxes may also jeopardise existing businesses when they are transferred if business owners do not have enough liquid assets to pay for the tax, is certainly given credence by research. The OECD references several studies that support this notion, including one undertaken in Greece in 2015 which found that, “in addition to leading to a significant decline in investment, slower sales growth, and a depletion of cash reserves, inheritance taxes strongly affected the decision to sell or retain the firm within the family.”
Interestingly, the Greek study also found that,“the negative effects of inheritance taxes on investment hold for both large and small firms,” although “they are stronger for family firms with low asset tangibility and businesses owned by people with low income from other sources.” Moreover, the OECD analysis finds that most countries provide inheritance tax relief for business assets, although it does emphasise that they may not always be well-targeted.
That analysis also mentions various research papers that have found that heirs tend to not be as skilled as their parents in running family businesses and that operating profitability may fall as a result. The OECD views this as an issue of “misallocating capital” and while it does acknowledge that, “countries may wish to support family business successions because family businesses are often a significant economic sector and a large employer,” it fails to recognise the ambition that can drive family businesses in the longer term and the strength that an intergenerational structure can bring.
In the United Kingdom close to half of taxable inheritances benefit from preferential treatment and this has a considerable narrowing effect on the IHT income received. But the narrowing of the IHT base in this way is not unusual among OECD member countries. It is also important to remember that a high proportion of this can be attributed to the spousal transfer exemption and donations to charity which can lower the rate of IHT.
The danger of unintended consequences attaching to any further discussion of potential adjustments to BR should not be underestimated, given its role in incentivising investment into UK PLC. And despite the data points and studies examined by the OECD, much deeper analysis of any re-targeting of the tax relief it brings would seem to be essential before any changes.
19
Source: Openwork Partnership
inheritance, state and gift tax revenues, 2019, all oecd countries
What’s more, despite much discussion, the OECD finds that, “The empirical literature on the impact of inheritance taxation on donors’ wealth accumulation is very limited and generally shows negative, but small effects.”
No wonder there are red-hot political sensitivities surrounding IHT, making any changes to the tax an ‘easier said than done’ scenario. Arun Advani, assistant professor at the University of Warwick, and a member of an independent wealth tax commission that reported last year says there are other ways to “raise more money for less political pain. I’d be surprised if [reforming IHT] is really where politicians go first.”
Another issue is the amount actually raised by inheritance taxes. According to the OECD, only 0.5% of total tax revenues are sourced from inheritance, estate and gift taxes on average across the OECD member countries that levy them. But this is in part because of the susceptibility to inheritance taxes to tax planning. This is very much linked to the generous tax exemptions and other forms of relief that are a key factor limiting revenue from these taxes.
1.5%
0.5%
1.0%
0%
% total tax revenue
Australia
Austria
Colombia
Czech Republic
Estonia
Israel
mexico
BNew Zealand
Portugal
Slovak Repuublic
sweden
Norway
Lithuania
Poland
Canada
Hungary
Slovenia
Italy
Turkey
Latvia
Chile
Greece
OECD
Iceland
Luxemburg
United States
Netherlands
Germany
Denmark
Spain
Switzerland
Ireland
United Kingdom
Finland
Japan
France
Belgium
Korea
- Simon Housden, Sales and Marketing Director,
TIME Investments
Inheritance Tax is a growing issue for many families and even during the pandemic many advisers have recognised that delaying a BR investment only delays the BR qualification period.
Source: OECD
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
SCENE IS SET FOR GREATER IHT TAX PLANNING DEMAND
INDUSTRY ANALYSIS / scene is set for a greater iht tax planning demand
T
20
top 5 reasons for the increase In
those seeking iht planning advice
greater awareness of the ijmpact of iht
advisers proactively discussing it with clients
rising property prices
pensions being more attractive as a way of passing on wealth
covid-19 incresing interest in financial reviews
Source: Openwork Partnership
0%
20%
40%
60%
he increase in IHT receipts this year, the failure of the RNRB to arrest that growth, the uptick in asset prices with rising inflation on the horizon, and the freezing of both the RNRB and NRB until April 2026 at the earliest, not to mention the potential for tax rises to pay for Covid-19’s impact on government coffers, is a potent combination.
But what do those at the sharp end think about how their clients will be affected and what that means for IHT tax planning?
In June, research from financial adviser network, The Openwork Partnership, reported that 38% of advisers saw an increase in demand for advice on IHT planning in the past year, with more than one in ten clients wanting to discuss it. What’s more, 60% expect demand to rise in the year ahead, with 19% stating they think it will increase significantly.
Dan Atkinson, Head of Technical, Paradigm Norton and Chairman of the CISI Paraplanner Interest Group, told us, “I think to an extent amongst those with an IHT ‘problem’ the pandemic has led them to ask bigger questions – not just about IHT. These relate to what ‘the good life’ looks like and good financial planners will help them work through what’s important to them. Within the advised market these conversations are happening more – even amongst those not looking to review IHT.”
The top driver of increased demand for IHT planning according to the Openwork Partnership’s survey, ‘Greater awareness of the impact of IHT’, could become linked to the launch of HMRC’s IHT tool via the government’s website. Launched in July 2021, the online resource is only designed as a guide, but can indicate whether the value of an estate’s assets will take it over the relevant IHT threshold.
While not intended to be used as a calculator, it is complex enough to consider whether or not any transferable NRB is available from a previously deceased spouse or civil partner and whether the RNRB is available to the deceased, although not whether there is any transferable RNRB available.
It also looks at the use of any Potentially Exempt Transfers (PETs) in the seven years prior to death or any gifts with reservation of benefit which need to be brought into the death estate, as well as any entitlement to assets through a life interest in a trust, gifts to charity and debts of the deceased that can be deducted from the death estate.
The resource then directs customers to further information on other reliefs available that could reduce IHT liability, giving customers more potential reasons to seek advice for implementing them.
What’s more, perhaps the intergenerational aspects of estate and IHT planning have now become more plain: Openwork found that the, “average age people seek IHT advice from a professional is 62-years old - however a quarter (25%) of advisers have seen an increase in the number of families visiting them for advice in the last 12 months.”
This is something that Clear Solutions Wealth & Tax Management’s managing director, Stephen Jones, sees continuing: “In our view the desire for efficient intergenerational wealth transfer will mean the demand for advice in this area will continue to increase unabated for the foreseeable future.”
Denese Molyneux, director of Molyneu(x) Financial Planning and chair of STEP England and Wales sees consistent growth in the number of people seeking advice for IHT planning. She commented that, “the boomer generation have amassed property and pensions over their lifetime and, in the last year, have accumulated more due to limited spending opportunities. Their children are struggling with university debt and the inability to easily access the housing ladder. Their parents will want to help.”
As far as BR specifically is concerned, more recent research revealed that BR is already considered for most or every client by 78% of advisers and after gifting (used by 94%), is the second most commonly used IHT planning tool. This puts it ahead of trusts (used by 73% and life policies (used by 67%).
“BR does have attraction in that it supports business (which in turn raises tax revenue) when implemented in the spirit of the rules,” said Atkinson. He went on, “this will no doubt be attractive for clients who are concerned about adverse taxation and are comfortable with the investment risks.”
Beyond the benefit for investee companies, Molyneux pointed out that the simplicity and control BR offers also influences investors: “Traditional life company trust structures were always based around life investment bonds, which were the mainstay of those companies. The structures were complex and relied on clients alienating themselves from some of their money. With BR products the money remains in the hands of the client which is a boon to those who are nervous about giving away assets in case they need them later.”
Certainly, with longer lives, later life expenses are also potentially multiplied. This is where Kay Ingram, chartered financial planner and principal at Ingram’s Insights, said BR can offer a “cake and eat it” strategy. “Increasing social care costs with no progress in finding a taxpayer funded solution leaves families with the dilemma of seeking to reduce IHT liabilities while retaining sufficient funds to pay for care. BR qualifying investments offer a unique solution to this,” she went on.
Nevertheless, according to Atkinson, “there is still some caution from the adviser community regarding use of BR within IHT planning strategies.” But that is changing, “with the availability of good quality independent due diligence on the rise the barriers are reducing. Your data shows that one of the big drivers have been advisers having proactive conversations. This is key for sustained growth of this market.”
- MARCUS STUTTARD
Business Relief isn’t just for elderly or ill clients! It can also be extremely attractive to younger clients wanting diversification in their portfolio and access to capital if needed but still benefit from the IHT relief.
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
Dominique Butters,
Executive Business Development Manager
BLACKFINCH
5. Managers in Focus
blackfinch
octopus
TIME
br solutions comparison
21
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
5. Managers
in Focus
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
managers in FOCUS / blackfinch
manager video content
go to website
go to website
Blackfinch.com
01452 717070
enquiries@blackfinch.com
dominique butters
Executive Business Development Manager
22
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
managers in FOCUS / octopus
manager video content
go to website
go to website
octopusinvestments.com
0800 316 2067
support@octopusinvestments.com
Rob Skinner
Head of the Octopus Inheritance Tax Service
23
jessica franks
head of tax
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
manager video content
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
managers IN FOCUS / BR COMPARISON TABLE
Blackfinch Investments Ltd
The Adapt IHT Portfolios invest into tried and tested asset classes through Busines Relief qualifying investee companies. They offer compelling return potential alongside a route to IHT relief in two years. Our four model portfolios cater to a variety of Investor risk profiles but are all ESG focussed. Blackfinch Adapt IHT's perfromance has been independently recognised, with the Growth option having one of the best returns over the past 5 years.
1992
£563m
£212m
Renewable Energy (Exclusively Solar & Wind); Property (Lending)
Dec-13
3 underlying companies
Refer to factsheet for latest annual performance. Since Inception*:
Ethical - 3.03%
Balanced - 3.99%
Balanced Growth - 4.45%
Growth - 4.89%
*Historic performance has been calculated based on the performance of the underlying companies
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 withdrawals are available
We have four directors involved in this product. Two of the directors are independent. Each of the three investee companies has an independent director.
Discretionary Portfolio Service
2%
0.5% + VAT deferred until exit and only if target return has been achieved
We do not take a performance fee.
Blackfinch only takes its annual management charge after achieving the minimum target return for the selected model portfolio.
2-4 weeks
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
24
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 double wins at both Investment Week’s Tax Efficiency Awards and the Growth Investor Awards.
2011
£4 billion
£700 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.
4.20%
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
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).
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
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 billion
£94 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
Octopus Investments
The Octopus Inheritance Tax Service is a discretionary Managed Service investing in one or more unquoted companies. The Service has three specific client objectives: 1. Inheritance tax relief on their investment when they die 2. Predictable 3% investment growth per year 3. Weekly access to their investment if they need it.
2000
£10.7bn (As of 30 June 2021)
£2.6bn (As of 30 June 2021)
Renewable energy, healthcare infrastructure, property finance and fibre infrastructure
2007
Currently 1
No annual return as this is a Discretionary Managed Service. Target return is 3% per year net of AMC.
3% per year, net of AMC
£25,000
No
3 (2 of which are independent)
Discretionary managed service
2%
Up to 1% + VAT per year (AMC is deferred and contingent on performance meeting 3%)
N/A
N/A
1 week target, never taken more than 1 month to provide liquidity
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
*A company that qualifies for BR at the time of investment may cease to qualify for reasons outside our control at a later date, which means any tax benefits will be lost until the capital is reinvested in BR qualifying company. **This is not a capital protection service and your client’s capital is at risk.
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
Blackfinch Investments Ltd
The Adapt IHT Portfolios invest into tried and tested asset classes through Busines Relief qualifying investee companies. They offer compelling return potential alongside a route to IHT relief in two years. Our four model portfolios cater to a variety of Investor risk profiles but are all ESG focussed. Blackfinch Adapt IHT's perfromance has been independently recognised, with the Growth option having one of the best returns over the past 5 years.
1992
£563m
£212m
Renewable Energy (Exclusively Solar & Wind); Property (Lending)
Dec-13
3 underlying companies
Refer to factsheet for latest annual performance. Since Inception*:
Ethical - 3.03%
Balanced - 3.99%
Balanced Growth - 4.45%
Growth - 4.89%
*Historic performance has been calculated based on the performance of the underlying companies
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 withdrawals are available
We have four directors involved in this product. Two of the directors are independent. Each of the three investee companies has an independent director.
Discretionary Portfolio Service
2%
0.5% + VAT deferred until exit and only if target return has been achieved
We do not take a performance fee.
Blackfinch only takes its annual management charge after achieving the minimum target return for the selected model portfolio.
2-4 weeks
Octopus Investments
Octopus Inheritance Tax Service (Discretionary Managed Service)
2000
£10.7bn (As of 30 June 2021)
£2.6bn (As of 30 June 2021)
Renewable energy, healthcare infrastructure, property finance and fibre infrastructure
2007
Currently 1
No annual return as this is a Discretionary Managed Service. Target return is 3% per year net of AMC.
3% per year, net of AMC
£25,000
No
3 (2 of which are independent)
Discretionary managed service
2%
Up to 1% + VAT per year (AMC is deferred and contingent on performance meeting 3%)
N/A
N/A
1 week target, never taken more than 1 month to provide liquidity
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 double wins at both Investment Week’s Tax Efficiency Awards and the Growth Investor Awards.
2011
£4 billion
£700 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.
4.20%
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
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).
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
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
*A company that qualifies for BR at the time of investment may cease to qualify for reasons outside our control at a later date, which means any tax benefits will be lost until the capital is reinvested in BR qualifying company. **This is not a capital protection service and your client’s capital is at risk.
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
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 billion
£94 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
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
24
6. What's on the Horizon?
fca changes for high risk investments
green gilts and saving bonds
what the managers say
25
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
6. What's on
the Horizon?
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
INDUSTRY ANALYSIS / fca changes for high risk investments
26
What section does this falls under? Spring budget?
FCA CHANGES FOR HIGH RISK INVESTMENTS
I
n April, the FCA published Discussion Paper DP21/1, considering,’ Strengthening our financial promotion rules for high-risk investments and firms approving financial promotions.’ This followed last year’s ‘Call for Input on the Consumer Investment Market’ and closed for comments on 1 July.
Driven by the impact of low interest rates drawing more consumers towards riskier investments with higher returns, the growing choice of services and products and a widespread increase in consumer
vulnerability, the aim is to address the harm to consumers from investing in inappropriate high-risk investments which do not meet their needs. The main focus of the paper was to address this through the financial promotion rules.
The regulator stated in the paper that, “we recognise that higher-risk investments can have a place in a well-functioning consumer investment market for those consumers who understand the risks and can absorb potential losses.” It goes on, “Even where it might make sense for someone to take more risk, consumers should be spreading their money across a diverse range of investments. This is to avoid a significant loss if a single investment, or type of investment, fails.” This is, of course, exactly what BR portfolios intend to do.
Where BR is concerned, the general industry view is that, if individuals are looking for income to maintain their lifestyle, to continue growing their funds while retaining access to them, as well as a means to offset a potential IHT liability, and they are sophisticated enough to understand the investment, there is a case for using BR services. But, the client must be suitable for the investment itself. For advisers this means assessing if, for the clients they have in mind, the advantages of BR outweigh the additional investment risk that is associated with investing in BR qualifying assets.
Why are BR investments part of the discussion?
Each investment into an unlisted underlying company selected by the BR service to add to the investor’s portfolio is classed as a Non-Readily Realisable Security (NRRS) by the FCA, unless traded on the Alternative Investment Market (AIM). NRRS are, very broadly, unlisted and non-exchange traded shares or bonds. The discussion paper focuses on these, along with Readily Realisable Securities, Non Mainstream Pooled Investments and Speculative Illiquid Securities.
AIM shares fall into the category of Readily realisable securities (RRS). They are liquid securities for which there is a reliable market and pricing. The FCA generally expects that, because they are
traded on a venue providing liquidity and are subject to initial and ongoing transparency requirements, they are more likely to be appropriate for retail investors than an unlisted security. However, it points out that these securities still come with a risk that an investor could lose their money.
Since most, although not all, BR managers accept investment from non-advised clients, most BR managers are caught by the financial promotion rules when dealing with at least a portion of their potential investors: All but 9 of the 64 currently open BR offers will take investment from non-advised individuals.
While mass marketing of BR qualifying AIM listed shares is generally allowed, any direct offer financial promotions regarding unlisted BR offers are already restricted. As a result, the recipient is required to be either a certified high net worth investor, a certified sophisticated investor, a self certified sophisticated investor or a certified ‘restricted’ investor (who has signed a declaration to say they have not in the last 12 months, and will not in the next 12 months, invest more than 10% of their net assets in these types of investments).
The FCA’s view is that the strict marketing restrictions already in place do not do enough to stop some consumers from investing in inappropriate high-risk investments which do not meet their needs. It is therefore considering strengthening the financial promotion rules further to ‘segment’ high-risk investments from the mainstream market.
- Sheldon Mills, Executive Director, Consumers and Competition, FCA
We have been clear that we want to deliver a consumer investment market that works well for the millions of people who stand to benefit from it. We are concerned that too often consumers are investing in high-risk investments they don’t understand and can lead to significant and unexpected losses.
• Positive frictions in consumer journeys
Possible changes suggested by the FCA include:
i
The intention here is to introduce steps that require more contacts with the client before investment intended to ensure the client has fully considered their course of action. Those steps might include cooling off periods, requiring SMS confirmations before investments are made or requiring consumers to watch ‘just in time’ education videos.
• Verification of HNWI, self-certified
& restricted investor certificates
There are concerns that investors may incorrectly categorise themselves when self-certifying their status as a HNWI, sophisticated or restricted investor. This has led the FCA to consider requiring those offering the investments to check that the prospective investor meets the relevant requirements, or to verify that restricted investors are not investing more than 10% of their net assets.
• Improving risk warnings
The view is that current risk warnings are often ignored because they are “too legalistic” and aren’t engaging to retail clients who view them as ‘wallpaper’. The regulator is considering changes to written and visual risk warnings, including changing the point at which they are displayed.
The next steps involve considering the responses to DP21/1, as well as testing of ideas informed by behavioural research and then consultation on proposed rule changes later this year.
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
GREEN GILTS AND SAVINGS BONDS
GREEN GILTS AND SAVINGS BONDS - WILL THEY IMPACT BR?
s part of the government’s commitment to reduce carbon emissions by 78% by 2035 compared to 1990 levels and to reach net zero by 2050, HM Treasury will issue the UK’s first sovereign green gilt in 2021 and a world-first green retail product - Green Savings Bonds via National Savings and Investments (NS&I).
Both are intended to enable individuals to support green projects and are part of the plan to, “ actively support the research and development of innovative technologies required to meet the Net Zero target, whilst crowding-in private investment through regulatory levers.” (UK Government Green Financing Framework, June 2021).
The Green Financing Frameword document states that,“many innovative technologies already exist but may require further investment to become cost competitive and to be proven at scale.” And in November 2020, the Prime Minister’s Ten Point Plan for a Green Industrial Revolution had already committed to, among other things, driving additional investment in renewable energy such as offshore wind.
The government will use money raised through the bonds to fund eligible green projects in the form of direct or indirect investment, subsidies, or tax foregone (or a combination of all or some of these).
A
27
The categories of Eligible Green Expenditures from bond inflows from Green Gilts and Green Savings Bonds include Renewable Energy, including:
• Support for the development of renewable energy generation capacity such as wind, solar and hydrogen
• Schemes for renewable heat use, including heat networks, heat pumps and hydrogen heating
• Support for energy storage systems, such as batteries, compressed air/liquid air, and gravitational storage
• Research and development for the commercial viability of renewable energy technologies
In terms of measuring and reporting the impacts of funding through the bonds, the government intends to track both environmental impact metrics and social co-benefits such as:
• Annual greenhouse gas emissions reduced/avoided in tonnes of carbon dioxide (CO2) equivalent
• Capacity of renewable energy plant(s) constructed or rehabilitated in MW
• Number of SMEs that receive support
This could spell additional support for the substantial proportion of BR offers that include green energy investees to propel them to more efficiency in their energy generation, greater uptake from the grid and growing income streams. This could apply to speeding up the continual development of solar panels to reduce costs and improve the conversion of the sun's rays to electricity so that output dips are more consistent even on less sunny days. It could mean reducing the costs of setting up wind turbines or further developing energy battery storage options so that more can be stored and delivered on demand to even out the intermittency of wind and solar. Or biomass energy plant operators might receive more help in finding viable ways to re-use more animal and plant waste.
All of these areas have been the subjects of attention of BR investment managers.
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
what the managers say
Gordon Pugh
Executive Business Development Manager
Blackfinch
jessica franks
Head of Tax
Octopus Investments
stephen daniels
Head of Investments
TIME Investments
WHAT'S ON THE HORIZON / WHAT THE MANAGERS SAY
28
So how are the managers feeling about the BR market and overall investment market conditions?
Here's what they have to say.
Where do you see the biggest opportunities on the horizon for BR investment?
What do expect the future to hold for BR as a tax relief?
Given the changes the government is already making to PRIIPs, what other changes would you like to see made in the realm of BR, now that UK financial services are somewhat freed from EU regulation?
ESG factors are becoming an increasingly important concern for investors across the board, and BR investors are no exception. While good governance has always been recognised as an important factor in investment decisions, firms will need to ensure that their offerings also address environmental and social concerns in order to stay relevant. To that extent, Blackfinch continue to deliver transparency through monthly factsheets which allow investors access to the key metrics surrounding their investments.
Covid has significantly impacted the UK treasury, and there are understandably concerns about how this may affect taxation generally. However, we do not feel that BR will be a target, as the government will not want to discourage investment into the smaller firms typically invested in by BR schemes, which we believe will be critical to the continuing recovery.
In general, we feel the current system works well, as it allows investors to mitigate IHT in a responsible way which is supportive of the economy. Where there is ambiguity in existing legislation, we always welcome further clarity, whether through test cases or legislation, as we would usually expect this to reduce BR risk for investors.
Last year marked the 25th anniversary of AIM, which as the London Stock Exchange has noted, is among the most successful growth markets in the world. As the UK recovers from the pandemic, policy makers have the opportunity to reinvigorate the economy, driving wealth creation across all regions of our country. If done correctly companies listed on AIM are likely to be a huge benefactor, correspondingly providing economic benefit with job creation.
Where do you see the biggest opportunities on the horizon for BR investment?
What do expect the future to hold for BR as a tax relief?
Given the changes the government is already making to PRIIPs, what other changes would you like to see made in the realm of BR, now that UK financial services are somewhat freed from EU regulation?
We continue to focus on asset-backed UK trading businesses, which limits our political and currency risk that some BR managers choose to take on when investing outside of the UK. As the UK works towards the 2050 zero emissions target, demand for clean energy generation continues to rise and renewable energy investment will continue to be an attractive investment opportunity for BR managers.
Where do you see the biggest opportunities on the horizon for BR investment?
What do expect the future to hold for BR as a tax relief?
Given the changes the government is already making to PRIIPs, what other changes would you like to see made in the realm of BR, now that UK financial services are somewhat freed from EU regulation?
The Patient Capital Review in 2017 and the more recent Office of Tax Simplification thematic review of inheritance tax in 2019 were both supportive of the broad range of benefits BR brings to the UK economy. As the UK recovers from the pandemic the funds raised through BR qualifying investments will provide an excellent source of patient capital for the economy to build upon, as such we expect the UK government to continue supporting the relief.
BR has been around since 1976 and in that time only a handful of changes have been made, mainly broadening the relief. Stability within the BR sector, rather than change, will have the biggest benefit in maintaining investor confidence.
As we ‘build back better’ post-Covid there will be a reliance on small businesses to help boost the economy. We hope the Government continues to value the support of small businesses and preserves the tax relief benefits associated with Business Relief.
The OTS report from 2019 concluded that Business Relief was working well and played an important role in “supporting family owned businesses and growth investment in AIM and other growth markets”. We agree with the OTS conclusions and do not see any changes needed at this stage.
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
what the managers say
So how are the managers feeling about the AIM market and overall investment market conditions?
Here's what they have to say.
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
28
learning objectives
cpd and feedback
about intelligent partnership
disclaimer
7. Further learning
29
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
7. Further learning
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
learning objectives
further learning / learning objectives
HOW DID YOU DO?
Covered in section 2
Understand how Business Relief sits within the current IHT landscape
Covered in sections 2, 4 and 6
Recognise the various factors that will affect the Business Relief market in the coming months
Covered in sections 4 and 6
Understand the types of open Business Relief offers available on the market
Covered in section 3. and section 5
Be able to benchmark current products and providers against each other on key investment criteria
Covered in section 5
Be aware of the key fees and charges applied by Business Relief managers
Covered in Section 3
Identify the main developments and news in the Business Relief market
30
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
learning objectives
HOW DID YOU DO?
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
30
CPD and feedback
further learning / cpd and feedback
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
31
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
CPD and feedback
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
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
31
about intelligent partnership
further learning / cpd and feedback
Intelligent Partnership is the UK’s leading provider of insights and education in the tax advantaged and alternative investments space.
W
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:
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
Intelligent Partnership produces INTERGEN, an immersive event 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
chris@intelligent-partnership.com
Conferences
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.
quarterly 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
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 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.
awards
A weekly snapshot of the latest articles, commentary and market data for financial services professionals, in two easy-to-read briefings on Tax Efficient Investments and Alternative Finance.
WEEKLY INVESTMENT BRIEFINGS
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.
e-learning
32
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
Intelligent Partnership is the UK’s leading provider of insights and education in the tax advantaged and alternative investments space.
about intelligent partnership
W
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:
chris@intelligent-partnership.com
Intelligent Partnership produces INTERGEN, an immersive event 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
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.
quarterly industry updates
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
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
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 sixth 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
A weekly snapshot of the latest articles, commentary and market data for financial services professionals, in two easy-to-read briefings on Tax Efficient Investments and Alternative Finance.
WEEKLY INVESTMENT BRIEFINGS
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.
e-learning
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
32
disclaimer
further learning / disclaimer
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 September 2021 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.
33
Foreword
Opening Statement
Update Overview
Key Findings
1. INTRODUCTION
Strong Economic Bounceback
Booming IHT Receipts and Inflationary Pressures
Regulatory News
AIM Business Relief
Understanding IHT exposure
What the managers say
2. market update
Market Composition
Fees and Charges
3. considerations for investment
HMRC IHT statistics examined
OECD's View on IHT
Scene is Set For Greater IHT Tax Planning Demand
4. industry analysis
Blackfinch
Octopus
BR Solutions Comparisons
5. managers in focus
FCA Changes for High
Risk Investments
Green Gilts and Saving Bonds
What the Managers Say
6. what's on
the horizon
Learning Objectives
CPD and Feedback
About Intelligent Partnership
Disclaimer
7. further learning
disclaimer
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 August 2020 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.
1. INTRODUCTION
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
33
