A new inheritance tax (IHT) planning service has come to market to coincide with the announcement that tax-free band will remain frozen for three more years.
With the IHT threshold set to remain at £325,000 a little while longer, Time:Advance is an IHT mitigation product from Time Investments that uses business property relief (BPR) targeting an uncapped return of 3.5 per cent pa.
The scheme invests in shares in UK businesses that invest in ungeared asset-backed trading businesses, such as lending on secured property. By using BPR, the investment becomes fully exempt from IHT after two years. It is possible to set up quarterly distribution or access the capital at any time.
Designed to be RDR-ready, the scheme uses factory gate pricing. The AMC is 0.75 per cent.
Initial charge is 2.5 per cent, while the minimum investment is £25,0000. Minimum top-up is £10,000.
www.time-investments.com
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Tax avoidance schemes have been under fire recently, but this seems not to have slowed down the number of products available in this area. For the most part, recent crackdowns have focused on schemes designed to skirt around income tax, not IHT. However, there have been plenty of occasions in the past where HMRC took a dislike to properties being placed in trust to avoid paying IHT bills, so this is not an area free from government scrutiny.
Nevertheless, business property relief is a well-known way to mitigate IHT without losing control of the assets like they would if gifted or placed in a trust.
The hitch is that the investment must be into unquoted, or listed on the Aim or Plus markets, so this can represent more risk in certain situations. However, if the investment is asset-backed, the risk level can be reduced.
While some would say it is immoral to avoid tax in this way, if loopholes and relief programmes exist, it is up to the client and the adviser to determine if it is the right choice.
geordie.clarke@ft.com
