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SECURITY OF CAPITAL
As with any asset-backed investment,
the value of a BPR investment depends
on the performance of the underlying
assets, so investors may get back less
than they originally invested, even
taking into account any tax relief
BPR products are investments that
can fluctuate in value. In addition, the
income distributions from BPR Products
(if any) can also fluctuate.
SELLING OR EXITING INVESTMENTS
Investors may have difficulty selling
their investment at a reasonable price
and, in some circumstances it may be
difficult to sell them at any price
There is a restricted market for
unquoted shares, and it may therefore
be difficult to deal in these shares, or to
obtain reliable information about their
value or how risky they are. Proper
information for working out the current
value of investments may not be available
Unquoted shares may have more
risks than quoted securities or shares.
Investments in unquoted shares may be
difficult to sell. Market makers may not
be prepared to deal in them
Unlisted shares may be issued by a
private company, and restrictions may
apply to the transfer of these private
company securities.
SUMMARY
“Many providers
only
accept advised business”
Nobody should be in any doubt that
investing in BPR qualifying assets has
risks:
Unquoted securities can be
difficult to value, difficult to sell and
statistically they are much more likely
to fail than “blue chip” larger
companies
The relief is only assessed by
HMRC on a case-by-case basis at the
time of death, as part of the probate
process, and cannot be guaranteed
Tax rules may change and cannot
be guaranteed, and a change in
legislation could devalue the
underlying investments
The investment managers of
course take all reasonable steps to
mitigate these risks, and the risks
have to be set against the significant
benefits - but how much investors
and advisers should let the tax tail
wag the investment dog is a real
dilemma. Perhaps the key question is
this: if the investor is of an age where
they are concerned about IHT, do they
still have the risk appetite for
unquoted securities? (Or, are they in
such poor health, swift IHT mitigation
is the over-riding concern?)
As a result of the complexity of
balancing risk and rewards around
this issue, many providers only accept
advised business, as a way of
ensuring that their investors have the
appropriate level of understanding of
the product. The responsibility is, as
always, with the advisory practice.
