Octopus sat down with the Director of Compliance Services at SimplyBiz to discuss recommending inheritance tax-efficient investments.
If you’re new to the world of investments that qualify for Business Property Relief (BPR), what are some practical steps you can take to help you write this kind of business?
In an Octopus Online Show last year, we spoke to Mark Greenwood, Director of Compliance Services at The SimplyBiz Group, the largest provider of compliance support for financial services in the UK.
And we asked him for his top tips for approaching this area of business.
“Historically tax-efficient investments like BPR were seen as non-mainstream” says Mark Greenwood. “But over the years we’ve seen an increase in business written in these areas.”
“Advisers are looking to go beyond the basic standard of planning for clients. And that’s where these kinds of solutions tend to come into play.”
So what is BPR?
BPR-qualifying investments encourage individuals to invest in unlisted trading companies, or those listed on the Alternative Investment Market (AIM). These are higher risk investments than main-market equities. To compensate for some of that risk, the estate of an investor can claim 100% relief from inheritance tax, as long as shares had been held for at least two years when the investor died. As this is simply an investment, unlike other forms of estate planning there is no need to give away wealth while alive. The qualifying shares are held by the investor until they die meaning they retain control of their wealth, and should they need to sell some or all of their investment to access their capital, they can do so, subject to liquidity.
Making a qualifying investment can be effective more quickly than traditional estate planning options, such as lifetime gifts, which can take seven years to reduce the value of an estate. Being able to make investments that support trading businesses and that provide relief from inheritance tax has made BPR qualifying investments a compelling option for many clients planning their estate.
Despite the growing popularity of BPR-qualifying investments, it can be perceived as a daunting area to get to grips with. So here are three helpful pointers from a compliance expert.
1. Get to know Business Property Relief
“Knowledge is everything,” says Mark. “For some advisers, if they’re not familiar with Business Property Relief there can be a fear factor.”
“Once they get to understand the investments, that fear dissolves.
“Not having the knowledge is not an excuse. For the right client, BPR should be being discussed.
“I would think in most adviser’s client banks there will be clients where tax-efficient investments like BPR are quite likely to be appropriate.
“BPR isn’t for every client. But advisers should be looking at it, even if it’s to discount it for a client. It’s far better to have the knowledge, look at BPR, and decide that actually for this client it’s not the way to go.”