The benefits of Business Relief
Investments that qualify for Business Relief (BR) can help unlock client conversations. Even if the client ends up going down a different route.
That’s because BR offers three significant advantages. Speed, growth, and access.
BR-qualifying investments are made in unlisted and AIM-listed trading businesses. Investing in these types of companies brings inherent risks for investors, so tax relief is available to compensate for some of that risk.
Once a BR-qualifying investment is held for two years it becomes zero-rated for IHT. The client must also hold the investment until death, at which time it should pass on free from IHT.
Because the client is making an investment, it means clients have an opportunity to target growth as part of their estate planning. It also means they can request access to their capital at any time. This is, of course, subject to liquidity being available.
Options available for clients with different objectives
There is a range of BR-qualifying investments out there in the market for clients to choose from, depending on their objectives.
This is particularly relevant for clients who could benefit from starting their estate planning earlier in life, where they may wish to target more significant growth from a portfolio of BR-qualifying shares listed on the Alternative Investment Market (AIM).
It’s also worth bearing in mind from a diversification point of view if you are revisiting estate planning for clients who already have plans in place but now face greater exposure to inheritance tax.
Bear in mind the risks
When it comes to BR-qualifying investments, you should remember that the value of an investment, and any income from it, can fall as well as rise.
Tax treatment depends on individual circumstances and tax rules could change the in the future. Tax relief depends on portfolio companies maintaining their qualifying status. The shares of smaller and unquoted companies could fall or rise in value more than other shares listed on the main market of the London Stock Exchange. They may also be harder to sell.
Jessica Franks, Head of Retail Investment Products, Octopus Investments
Learn more at Octopus Live Online 2022
Want to learn more about the estate planning landscape, the advice opportunity, and how you can support clients?
Sign up to Octopus Live Online 2022, a CPD-qualifying estate planning webinar on Wednesday 13th July at 10am.
As well as refreshing your knowledge of IHT, we’ll help you identify clients who could benefit from a conversation about inheritance tax, and we’ll cover key inheritance tax planning strategies, including the use of Business Relief.
It’s easy to register now. Just go to octopusinvestments.com/octopuslivewebinar
For professional advisers and paraplanners only. Not to be relied upon by retail investors