BR Report 2019

8 9 EXECUTIVE SUMMARY KEY FINDINGS WHAT’S IT ALL ABOUT? HIGHLIGHTS FROM OUR RESEARCH 77% of BR offers are now GENERALIST IHT RECEIPTS up to £6.3bn in 2023/24 £600m IHT TAX GAP drives simplification ONLY 4% of advisers say Brexit uncertainty has made BR HARDER to recommend AIM lost more than 20% VALUE in Q4 2018 50% of AIM company revenues come from OVERSEAS AIM value opportunities: UK EQUITIES TRADING AT 30% discount to global peers AVERAGE DIVERSIFICATION is up to 16 INVESTEE COMPANIES PROBATE FEES rise by up to 2700% +1m paying too much into their PENSIONS 1/4+ OF BR PRODUCTS include SECURED LENDING HMRC investigations in 1 in 4 ESTATES Current economic and political uncertainty in the UK is feeding into the investment landscape. What is certain, is that IHT receipts are continuing to rise even allowing for immediate economic concerns. The latest projections put the government’s IHT take at £6.3 billion by 2023/24. Under these circumstances BR can still be a useful estate planning tool, but there may be some extra considerations. Key themes that this report focuses on include: BR SECTOR FOCUS REVEALS DEFENSIVE DRIVERS This report takes a deeper dive into the sectors that BR managers are currently focused on. We look to understand why, in the current climate, these sectors are popular and at the factors that could drive their performance in the near and medium-term future. While a wide scope allows managers to assess lots of options and take advantage of the timely and opportune, secured lending and energy generation top the areas of interest. AIM VOLATILITY FLARES There’s no denying that equity markets have taken a battering in the last six months and AIM is no exception. But we discover how BR manager skill can dampen volatility, the rise in potential value opportunities and how relative liquidity is still high. With half of revenues for AIM companies coming from overseas, there is some comfort too for those with worries over the UK’s upcoming economic capabilities. FOCUS ON IHT TAX GAP There was obvious uneasiness about the future of BR when it was included in the Office for Tax Simplification’s (OTS) review of IHT last year. But after the publication of the first of two OTS reports, this has dissipated as BR has been found to be ‘fairly straightforward.’ The latest HMRC figures show the IHT tax gap is at 11%, almost double the overall average of 5.7%. Since failure to take reasonable care and plain old errors account for almost 30% of uncollected tax, the push to reduce complexity is logical. This appears to be a more substantial influence on the continuing escalation of HMRC IHT investigations than the use of BR, particularly at a time when funding for UK companies is at a premium. PROOF THAT PENSIONS LIMITS ARE STARTING TO BITE Government figures and independent research have highlighted that thousands of people have already paid too much into their pensions. The resulting breaches in annual and lifetime pension allowances amount to hundreds of millions of pounds that will attract penalties. More importantly, over a million more people look set to do the same with what could be billions of pounds. The opportunities for advisers who discuss pensions with their clients are potentially huge and BR could provide ready-made solutions for some of the excess cash looking for a new, tax-efficient home.