Overview
WHAT IS IT?
A managed service that seeks to mitigate Inheritance Tax (IHT) and generate capital growth, investing over the long-term into shares of smaller companies, which we expect to qualify for Business Relief (BR) for Inheritance Tax.
WHY KILLIK & CO?
Our team specialises in research into smaller companies and shares are selected for their growth potential over the long-term, not simply the tax benefits, making the service particularly useful for intergenerational planning. Each client has a segregated portfolio of shares, offering complete transparency of the individual investments. Investment into the service is flexible, being available both directly and via the Killik & Co ISA. The Inheritance Tax Portfolio can be held in either single or joint accounts
This service may be of interest for those prepared to take a higher degree of risk,
looking for a long-term investment into smaller companies, which has the benefit of
helping mitigate exposure to IHT.
The Service
Inheritance Tax (IHT) is no longer just a problem for the ultra-wealthy. Rising property prices in the UK mean that more and more families are now facing potential 40% IHT liabilities. The Inheritance Tax Portfolio Service seeks to mitigate some of this IHT liability by investing in a portfolio of companies listed on the London Stock Exchange’s Alternative Investment Market (AIM) that we expect to qualify for Business Relief.
Assuming you survive for two years after the portfolio is fully invested, shares that have remained qualifying for Business Relief, and are held at the time of death, may then attract 100% Business Relief when calculating any Inheritance Tax liability.
Returns from smaller companies can be volatile and shares are typically riskier than those of larger ‘blue-chip’ stocks. You and/ or your beneficiaries therefore need to have a long-term time horizon, which we would describe as being ten years or more.
We seek out companies that have the ability to grow their profitability over time, thereby generating capital growth, however the portfolio will typically generate little or no
dividend income
The potential benefits
When planning their estate, people are often inclined to give assets away in the hope of living for seven years, at which time the assets become free of IHT. A common problem with this approach however, is simply that people often live longer than expected and find themselves running short of money later in life.
The Inheritance Tax Portfolio allows you to retain ownership of your assets, but with the option to bequeath them to grandchildren or great grandchildren, and mitigating Inheritance Tax on death.
This way funds can still be drawn upon if the need arises, and the fact that the portfolio is invested in smaller growth companies is entirely consistent with the intent to ultimately pass assets
to the younger members of the family.
You are able to invest in the Inheritance Tax Portfolio Service using your ISA wrapper, enabling you to take advantage of the usual income tax and CGT benefits in addition to any potential Inheritance Tax benefits.
Find out more
Business Property Relief (BPR)
Originally designed to prevent the break-up of smaller (typically family-owned) businesses in order to meet their IHT bills, Business Relief has since been expanded to cover a wide range of business assets, including the shares of certain companies listed on AIM.
Risk Factors
Investments in smaller companies, whether quoted or unquoted, carry a higher degree of risk than investing in more liquid shares of larger companies. AIM investments are generally more volatile in price than shares on the Official List and may be impossible to sell at a time of your own choosing. It is for these reasons we generally recommend that any investments in the service form only part of your overall wealth. As is the nature of investing, the value of your investments will rise and fall over time. Please do not assume that past performance will repeat itself and you must be comfortable in the knowledge you may receive less than you originally invested. Ultimately this may outweigh any tax benefits. Although this service can help mitigate Inheritance Tax, it will not be suitable for everyone and there may be other tax planning methods available that are more suitable for you. If you are unsure you should always seek financial planning and tax advice. Tax treatment depends on individual circumstances and may be subject to change in the future.
For more information, please read the Inheritance Tax Portfolio Service fact sheet and discuss with your Investment Manager or Wealth Planner.
