6
EXECUTIVE SUMMARY
For advisers looking for swift,
simple IHT solutions that are flexible
enough to give their clients ongoing
access, BPR cannot be overlooked.
The two year time frame to achieve
100% relief is the quickest way
possible to mitigate IHT; the le
gal
structures are uncomplicated and
require no underwriting; and the
flexibility and access is a boon to
advisers trying to plan around
unpredictable (but long) lifetimes.
Two of the biggest issues for advisers
are client suitability and product
due diligence. As BPR products are
invested into smaller, unquoted assets
(although companies listed on AIM and
the ISDX are acceptable) there is an
investment risk associated with them
and therefore they are only suitable
for clients with the appropriate risk
appetite - however, the interaction
between risk appetites, capacity for loss
and the client’s level of sophistication
mean that judgements have to be
made on a client-by-client basis.
On the product side, there is a
surprising amount of difference
between the various product providers
and the underlying investments, so
there is some work to do for advisers
to get their arms around the whole-
of-market. Some products, especially
those that are not investing in AIM
listed companies, require a more
thorough level of due diligence
than others in order to develop the
required level of understanding.
There are resources to help advisers
through this process though.
The interaction between the targeted
level of return, level of risk, level of
liquidity and qualification for the
relief represents both a dilemma
and an opportunity for the product
providers - managing the interaction
of these variables is essentially their
value proposition to customers.
Looking forward, the expectation is
that we will see increased levels of
investment into BPR products over the
next five years as estate planning moves
up the agenda for many consumers.
The feeling from advisers is that the
more certainty they have around
the regulations, client suitability and
underlying investment risks, the easier
it is for them to write more business.
“Investments that utilise
BPR are unique in that
they mitigate Inheritance
Tax, but allow investors
to access their funds and
hopefully enjoy some growth
at the same time. There’s a
growing need for this kind of
flexibility when it comes to
estate planning, and advisers
might be pleasantly surprised
at the range of investments
on offer: there should be
something to suit most of
their clients. Speed of relief
is the other major selling
point. However, advisers
must interrogate providers
on issues such as performance
fees, gearing and the nature
of the underlying trades”
Daniel Kiernan, Intelligent Partnership
QUOTED / UNQUOTED / LISTED
For the purposes of this report we are using the HMRC definitions to determine
what is quoted / unquoted. A quoted company would be listed on a recognised
stock exchange (which could be international – HMRC keep an up to date list here:
- stock-exchanges
). However, both the UK’s “junior”
markets AIM (Alternative Investment Market) and the ISDX (ICAP Securities and
Derivatives Exchange, formerly known as PLUS) are not recognised stock exchanges
and therefore we refer to underlying investments on these exchanges as “unquoted”
throughout the report.
BUSINESS RELIEF / BUSINESS PROPERTY RELIEF
Technically, we are talking about Business Relief, but as it is almost always referred to
as Business Property Relief or BPR, we shall use these terms throughout the report.
THIRD PARTY CONTRIBUTORS
This report has been written with input, guidance and assistance from Adviser Home,
Bovill, BDO UK, St. James’s Place, MICAP and several managers who are credited in the
report. Individuals from these alphabetical firms reviewed sections of the report that
were relevant to their area of expertise and suggested edits and improvements. Of
course any errors or omissions are ours and not theirs.
