Intelligent Partnership’s research was highlighted in an article by FT Adviser. Click here to read the original article.

…There might also be some parents that do not want to gift their hard-earned cash to their children, preferring instead to keep control of it. In such cases, it can be useful to consider other forms of inheritance tax planning.

For example, the government offers tax incentives to people that are interested in investing in qualifying smaller companies, and that are willing to accept the risks that go along with such investments.

These incentives are aimed at encouraging greater investment into smaller companies that are providing significant benefits to the UK as a whole, both in terms of job creation and economic prosperity.

With all of us living longer, and therefore looking forward to 20 years or more in retirement, the long-term growth potential of a smaller company investment might be an interesting choice in combination with the investment incentives on offer.

For example, a healthy investor in their mid-60s, who is comfortable with the higher risks associated with smaller company investments, might prefer to invest in a portfolio of companies listed on the Alternative Investment Market (Aim).

They might be smaller than most companies listed on the main market of the London Stock Exchange, but Aim-listed companies can still be worth hundreds of millions of pounds.

Many of these companies have become household names familiar to clients – such as online retailer ASOS, Majestic Wines and Young & Co’s Brewery.

It is also possible to hold Aim-listed shares in an Individual Savings Account (Isa). This means an investor could select an Isa that is invested in companies that qualify for Business Property Relief (BPR) – a relief from inheritance tax by which some unlisted trading companies can be eligible.

And as long as the shares have been held for at least two years on the client’s death, the investment can be left to beneficiaries free from inheritance tax.

Naturally, investors are almost certainly better seeking professional advice to select an investment manager with expertise in constructing a suitable inheritance-tax-efficient portfolio.

The ‘feelgood factor’
There are a number of investments that aim to qualify for BPR. It is a government-approved relief that is already helping many advisers, solicitors and accountants with estate planning arrangements.

Indeed, a tax-planning survey carried out earlier in 2016 by market research company Intelligent Partnership found 60 per cent of financial advisers plan to recommend BPR-qualifying investments to more clients in the next two years.

Like any investment, the quality of the investment should support the decision to include it as part of any estate planning strategy. And not all managers of BPR-qualifying investments will have the same level of experience in this market.

There’s a ‘feelgood factor’ to some of these investments that make them more attractive for certain clients than the other estate planning options available. Investors like the fact that they are investing in renewable energy, healthcare and smaller companies that are creating thousands of jobs and generating economic growth…