AIM Report 2019

32 33 There are a few things that investors need to bear in mind when considering AIM offers. In the context of tax efficient investments, it is important to remember that the tax tail should not wag the investment: the investment needs to stand up and make sense even if the tax reliefs were not applied. As we have already discussed, the recent changes to the rules around the EIS and VCT also need to be considered, because using these schemes for AIM- quoted companies will inevitably mean investing in companies at the riskier end of the market. However, there are also some other emerging changes that could have an impact on investment decisions. As demonstrated by the Beauhurst thought leadership article, many companies that list on AIM have already been selected and supported not only by private investors, but also by private equity and venture capital firms, using their expert investment selection criteria, techniques and due diligence. The potential for follow-on investment from those firms would seem to be a good signal to private These changes could have implications for AIM investors where they have acquired portfolios of BR- qualifying shares, with the intention of using these investments as a way to manage their inheritance tax liability. BR qualification has never taken the value of those shares outside of the shareholder’s estate for the purpose of calculating their estate value. The relief simply reduces the IHT applicable on these shares to zero. As a result, other estate planning methods that do remove assets from the estate, such as trusts, could become more beneficial in the context of calculating probate fees. Nevertheless, trusts can be costly and this expense could reduce or even wipe out completely the benefit of the reduced probate fee that may be obtained on the lower value estate. When considering the benefits of and AIM BR-qualifying investment versus an additional probate fee cost, there can be clear advantages, as shown in the graph on the right. Originally, it had been planned that the Order would come into force on 1 April 2019, however, in March that year, an MoJ spokesperson confirmed the Order would not come into force as planned and was quoted as saying that it would come into force “as soon as possible” but that Brexit matters were taking precedence. 34 “This new banded fee model represents a fair and more progressive way to pay for probate services compared to the current flat fee and reflects our commitment to protecting access to justice by ensuring we have a properly funded and resourced courts system.” — PARLIAMENTARY UNDER SECRETARY OF STATE FOR JUSTICE LUCY FRAZER QC MP, MINISTRY OF JUSTICE, NOVEMBER 2018 FEES TO BE TAKEN: SCHEDULE 1 OF THE NON-CONTENTIOUS PROBATE (FEES) ORDER 2018 IMPACT OF PROBATE CHANGES Considerations for investment / Future prospects On an application where the assessed value of the estate Fees to be taken exceeds £50,000 but does not exceed £300,000 £250 exceeds £300,000 but does not exceed £500,000 £750 exceeds £500,000 but does not exceed £1,000,000 £2,500 exceeds £1,000,000 but does not exceed £1,600,000 £4,000 exceeds £1,600,000 but does not exceed £2,000,000 £5,000 exceeds £2,000,000 £6,000 £2m estate with £100,000 in trust outside the estate £20k £5k IHT on transfer to trust (no NRB available) probate fee £40k IHT saving £15k net saving investors, including from those looking for tax efficiencies, who invest alongside them when the companies come to be quoted on AIM. Probate fees Personal representatives (executors where they are appointed by a will, or administrators otherwise) are responsible for dealing with the estate of a deceased person. Their authority to receive the assets in the estate is proved by a grant of representation, often referred to as a grant of probate. In November 2018, following a lengthy consultation period, the Ministry of Justice (MoJ) laid the draft Non‑Contentious Probate (Fees) Order 2018 before Parliament to overhaul the way probate is granted. The existing system of a flat fee of up to £125 for bereaved families would be replaced by a sliding scale, with the largest estates facing probate fees of £6,000. FUTURE PROSPECTS WHAT ELSE IS ON THE HORIZON? £34k net tax saving £2m estate incl. £100,000 BR investment rather than moving outside the estate* £40k IHT saving £6k probate fee * where no other IHT reliefs apply