Seneca Partners, the investment management and corporate advisory business, has launched a new service that offers clients full relief on inheritance tax after two years.
The service aims to help investors protect their legacy from IHT by investing in a fund that lends to businesses - thus simultaneously giving a helping hand to the British economy.
The Seneca Inheritance Tax Service uses the principles of business property relief (BPR), which was introduced in 1976 and allows investors in unquoted shares to qualify for IHT exemption once the assets have been held for two years.
Through the service, businesses seeking to borrow are matched with investors looking to exempt their assets from inheritance tax.
Investors taking part in the scheme will purchase shares in a limited company - Seneca Secured Lending - that offers fully secured short- and medium-term loans to suitable businesses.
The shares will be fully exempt from IHT once they qualify for BRP two years later.
The security and preservation of capital are the stated primary investment goals of Seneca Secured Lending, as the company aims to deliver net capital growth for investors of 4 per cent per annum.
The one-off initial fee is 2 per cent and there are no annual management charges.
Comment:
Seneca’s new inheritance tax service not only benefits people wishing to protect their estate from IHT, and their families from having to foot a potentially large inheritance tax bill, it also gives the economy a boost by providing much-needed finance to businesses.
Any product that helps reduce the amount of tax paid can surely be seen as a positive step. IHT is due on an estate - including any assets held in trust and gifts made within seven years of death - if it is valued over the 2014 - 2015 threshold of £325,000.
The combination of rapidly rising house prices and the freezing of the IHT threshold until 2019, making thousands more families liable for IHT, have made the service a very appealing route for investors.
Business’ demand for loans from the service are also strong, as high street banks are still often unable - or unwilling - to lend to SMEs. Loans are usually fully secured on property, company, or personal assets.
Even if hesitant to join the scheme initially, investors are able to retain ownership of assets and have the option to withdraw them at any time with a three-month notice period. Investors must remain a part of the scheme for the full two years to qualify for the IHT relief.
The scheme has already seen £10m invested in the first few months, and hopes to exceed £20m invested by the end of 2014.
