Are you one of the growing number of people who are now exceeding the Nil Rate Band? If so, you could be faced with large Inheritance Tax liabilities in the near future.
Why? For one, property valuations have been rising at a faster rate than the NRB. But inertia on the owner’s part is also responsible. Though the Government have pledged to make significant changes where the family home is concerned, IHT planning remains a priority for business owners looking to reduce any prospective tax liabilities.
Traditionally, IHT planning methods usually result in a loss of access to and control of assets, and this form of estate planning can take up to seven years to become effective. There is, however, a viable alternative. A solution based around Business Property Relief – or BPR – is certainly worth considering.
These BPR-based solutions generally revolve around the Alternative Investment Market (AIM), centring their investment propositions on the potential for growth. Its myriad benefits, particularly when combined with IHT advantages – derived from holding certain qualifying stocks – accounts for its growing popularity.
We see the inherent volatility of AIM as counter to the goal of preserving capital for future generations. The alternative? BPR solutions based on unquoted companies.
These aim to invest money into companies whose activities have a low risk profile and where capital preservation is key, such as infrastructure businesses and asset-backed investments. The counterparties involved can be Government agencies and other large corporates such as energy companies.
For many, these present a more suitable risk/return profile for investors and their beneficiaries alike, supported by their reliable yield and asset cover.
Typically, these types of products have the following characteristics:
– Suitable for retail clients
– Capital preservation focused
– Target 3-4% per annum return (can be accumulated or distributed)
– Return profile: not correlated to equities
– Investments are IHT exempt after only 2 years, provided they are held until death
– Investors retain ownership and control of assets throughout
– No impact on Nil Rate Band
If you require more information on Business Property Relief and its implications, or are seeking face-to-face advice on your planning options, do not hesitate to get in touch with us via our contact page.