Tax  

How to get clients to refer you to their parents

Are they creating trusts for the people they don’t trust? “And don’t forget - you are allowed to pay the tax bill”, he says, “but do not forget this is going to have a big impact. IHT is a voluntary tax”, he reminded the room.

So how can advisers help clients make their financial plans while being tax efficient? He said while the bulk of planning would look at the usual pots - pensions and Isas, there were also other investments that could be built into a portfolio that would both generate a return and be tax efficient. 

Recent research conducted by Octopus among advisers found 76 per cent of them said they were prepared to use alternative investments to help clients who are doing later-life and intergenerational planning, because estate planning's increasing complexity was demanding more flexible solutions. 

According to Mr Bird, one of those flexible solutions is business property relief, which is increasingly being used as part of intergenerational planning.

He said BPR can not only help provide the tax-efficiency clients need in that it can mitigate IHT, but also provide a good long-term investment for the client and for the beneficiary.

According to HM Treasury, you can get 100 per cent BPR on a business or interest in a business, or shares in an unlisted company. 

Clients can also get 50 per cent BPR on:

  • shares controlling more than 50 per cent of the voting rights in a listed company; 
  • buildings or machinery owned by the deceased and used in a business they were a partner in or controlled land:
  • buildings or machinery used in the business and held in a trust that it has the right to benefit from. 

You can only get relief if the deceased owned the business or asset for at least two years before they died, but the high tax efficiency of these shares means the potential IHT bill can be offset.

When it comes to advising on shares that qualify for BPR, however, he said “don’t compromise” on things such as strength, experience. “It needs to be a good investment in a good tax environment, he said. The tax advantage should not excuse the investment.” Therefore, advisers and paraplanners should always make a good investment decision, because this is someone’s life savings, he stressed.

This is also to be considered as “balance” within a portfolio, not to be 100 per cent of a client’s investment portfolio, he said. But given that shares can be traded - with varying degrees of liquidity - it is possible to sell these if the client needs to raise funds for something such as an immediate needs annuity.

Mr Bird added: “This gives balance and flexibility so that if a client’s situation changes, the portfolio can change with them.”

simoney.kyriakou@ft.com