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WAYS TO ACCESS BPR
There are a number of ways to access
BPR - we’ll take a look at each of them in
this section.
DO-IT-YOURSELF
Although the qualification rules are
simple, it’s still worth looking at some of
the potential pitfalls that would exclude
an investment from qualifying for BPR.
This report is focused on investment
products that give access to BPR,
but before we analyse the different
investment structures and
opportunities in the marketplace,
it is worth examining some of the
DIY methods of accessing BPR.
#1 OWNING YOUR OWN BUSINESS
As noted earlier, the original intention
of BPR was to protect small businesses
from IHT and ensure that they could be
handed onto the next generation intact.
Of course this is still the case today
and any clients who have their own
businesses are hopefully well advised
to ensure that they stay within the rules
for BPR qualification. We examine how
BPR products can help small business
owners and corporate clients in a
separate section.
#2 SELF-INVEST / INVESTING IN
“FRIENDS AND FAMILY”
In theory, it is possible to self-select BPR
qualifying investment opportunities.
In practice this activity would require
a lot of time and effort on the part
of the investor or adviser and some
experience of investment analysis and
portfolio construction. As with any
DIY activity, if you know what you’re
doing, you can save a large amount of
costs: and if you don’t know what you’re
doing it can turn out to be vastly more
expensive in the long run.
In a similar vein, investors might provide
equity capital to small businesses that
happen to be within their inner circle
and as a bonus these investments
turn out to qualify for BPR. This isn’t a
strategy as such, but people who have
made these sorts of investments should
check in case they are eligible for reliefs
they weren’t aware of.
For most people, the quickest, simplest
and easiest way to access BPR will be
to invest in a product that has been
specifically designed to help mitigate IHT.
EIS & SEIS
Any EIS or SEIS qualifying investment
will also qualify for BPR - the criteria
to qualify for EIS/SEIS are stricter than
BPR and EIS/SEIS could be viewed as a
subset of BPR.
Of course, EIS and SEIS bring additional
tax benefits to BPR - however they are
usually riskier investments, with lower
levels of liquidity and higher levels of
fees and charges. So it is not the case
that investors should go for the scheme
with the most generous benefits - those
benefits are only conferred when
there is additional perceived risk. If the
objective is IHT relief while retaining
access to the funds and the risk appetite
is lower, then BPR should be preferred
over EIS or SEIS.
DISCRETIONARY
INVESTMENT
MANAGEMENT
The easiest way for non-business
owners to access BPR is through an
investment product. These are typically
run by investment managers who
specialise in small companies. The
manager will take responsibility for:
Stock selection
Ensuring sufficient diversification
across the portfolio (where they use a
portfolio approach)
Ongoing monitoring to ensure that
the investments retain BPR qualifying
status
Sourcing new investments as older
ones exit
This is a discretionary investment
management service. Typically the
process is:
The client makes an investment
with a discretionary investment
manager, who has full discretion
where to invest the money.
The money is looked after by a
custodian, until it can be placed
(usually within 30 days or less).
Once it is placed, depending upon
the structure the manager uses,
the investor will have beneficial
ownership of either: an SPV, a
holding company, shares in an
unquoted company or shares on
AIM.
The structure will give the investor
exposure to BPR qualifying assets
that are involved in activities
and sectors such as: renewable
energy, energy efficiency, property
development, lending, PFI, media
and infrastructure - there is no
restriction on what can be invested
in within the qualification criteria,
but the managers are generally
looking for low risk opportunities
that meet their capital preservation
objectives.
*
depending on skill & strategy
DIY
SEIS
/ EIS
Discretionary
Management
Cost
Time &
Resource
Risk
varies*
Potential
Growth
varies*
varies
(depending
on the
underlying
trades and
level of
gearing)
low
high
