Amati AIM IHT Portfolio Service
The UK government supports certain exemptions from Inheritance Tax ("IHT"), allowing a degree of tax planning to protect wealth as it passed between generations. One of these exemptions is Business Property Relief ("BPR"). This provides exemption from IHT in respect of share transfers following the death of a shareholder, where the holdings are in unquoted companies - including, for the purposes of the legislation, certain AIM-quoted companies - and have been held for a period of at least two years.
Designed to work in association with financial advisers, the Amati AIM IHT Portfolio Service is a discretionary investment management service useful for the purposes of IHT planning. Clients of the Service will own a portfolio of shares in AIM-quoted companies, in an account held in their own name with James Brearley & Sons, the Administrator & Custodian for the Service, and not as part of a collective investment scheme. The holdings will be selected and managed on an ongoing basis by the investment team at Amati, who have particular expertise in UK smaller companies and long experience of investing in AIM-quoted stocks. The selection of companies for client portfolios will be based on Amati's Model Portfolio, which means that all users of the Service will hold, subject to liquidity, the same portfolio of holdings with broadly the same weightings. Amati works closely with financial advisers, who will assess the Service and consider whether the solution offered by the Service is suitable as part of each client's overall investment strategy.
There are significant potential benefits to holding the portfolio within an Individual Savings Account (ISA), because in addition to BPR exemption from IHT after a holding period of at least two years, it also provides an investment wrapper that is free of tax on dividends, interest and capital gains. Clients using the Service outside an ISA wrapper may find that capital gains are generated when portfolio holdings are sold, and that there may be a significant number of transactions which would need to be reported on tax returns. Please ask your financial adviser for more details.
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Inheritance Tax Planning
Main Features of Business Property Relief (BPR)
- For fully qualifying investments, 100% IHT exemption on share transfers following the shareholder's death.
- Shares must have been held for at least two years, and must be inherited as shares, so it is advisable to check that the client's will makes this clear.
- The relief can be restricted where the company owns 'excepted' assets not used wholly or mainly for business purposes (Amati uses all reasonable endeavours to ensure that investments in the portfolio are in companies which qualify for 100% relief, but cannot guarantee that this will be the case).
- Shareholdings must be in companies whose businesses are not wholly or mainly that of dealing in securities; land and buildings; or the making and holding of investments.
Whilst professional advice should always be sought, the Amati AIM IHT Portfolio Service might be suitable for clients if:
- They are individuals domiciled in the UK.
- They have material surplus financial assets, exceeding £250,000, and have adequate income and liquid investments to provide for anticipated financial needs during their lifetime.
- Their total estate is well in excess of the individual nil-band IHT limit of £325,000, or a joint £650,000 for both spouses.
- They understand, and are comfortable with, the risks involved in investing in equities, and smaller companies in particular.
- They understand that small portfolios will be more heavily impacted by fixed portfolio charges, especially when initially established.
- They are looking for an alternative to more traditional IHT planning methods such as trusts, which can be complex to set up, or lifetime gifts, which take 7 years to achieve full exemption.