14 June 22

Prioritising effective estate planning solutions

Each year, a huge number of families are surprised with the level of tax due when they lose a loved one. The Office for Budget Responsibility has found that families could pay £37bn in inheritance tax over the next five years, 36% more than in 2017-2021. In some ways this is expected. Surging property prices have increased the value of family holdings, yet, for over a decade the nil-rate band has been frozen at £325,000.

However, perhaps a more significant reason is that people don’t plan for the worst. Nearly half of Britons over 55 years old don’t have a will, and many more fail to seek informed advice on exemptions and relief. If they do plan, they will discover a range of legitimate options to reduce and even nullify their IHT liability.

One established estate planning option is investments that quality for Business Relief (BR). BR has been part of inheritance tax legislation since 1976 and can enable clients to obtain IHT relief faster than trusts or gifts and, most importantly, can be done without a loss of control for the investor over their investment. With a BR-qualifying investment, the shares become 100% inheritance tax exempt after a holding period of two years, as long as the shares are still held at the time of death.

Given that inflation is set to reach a 30-year high, another advantage of BR qualifying investments is that they can provide reliable returns and capital growth. BR is typically available for: shares in an unquoted qualifying company; shares in a qualifying company listed on the Alternative Investment Market (AIM); and an unincorporated qualifying trading business, or an interest in one, like a partnership.  As with all investments, there are risks; the value of an investment can rise and fall, and clients can get back less than they invest. However, there are basic ways to mitigate risks. One method is focusing on diversification – a fundamental tool in financial planning.

Diversification in BR

A balanced spread of investments across asset types and sectors is a smart way of protecting against volatile peaks and troughs and will help to target sustainable returns. It is a fundamental component of financial planning. Within BR, diversification is also vital way of building a balanced investment portfolio that limits exposure to one single asset.

Triple Point’s sector tool shows how a portfolio can look when funds are spread across different providers in the unquoted BR space. It is a great way of demonstrating how a client can diversify their investments across sectors of the economy.

For example, where most providers in the unquoted BR space tend to focus on renewables or infrastructure, Triple Point is the only provider to offer the unique trade of leasing and lending , making it a diversifier to other providers in the market. Advocating for providers which can offer a wide range of sector diversification can ensure clients are truly spreading the risk.

Diversification through leasing and lending

Triple Point’s approach is to target BR through specialist leasing and lending companies that arrange funding for both the public sector and private corporations, ranging from local authorities, the NHS, housing associations and large corporates – to tens of thousands of UK SMEs. Leasing and lending has previously been the preserve of banks and financial institutions, but Triple Point’s estate planning solutions uniquely enables investors to access this strategy benefitting from highly diversified trading that is uncorrelated to equity markets.

Managing a diverse debt financing book with c.£750m of AUM, Triple Point provided £285m of financing to UK-based organisations to March 2021, including £125m of CBILS loans to those SMEs in communities across the UK most impacted by the pandemic. Over the last two years, Triple Point increased the provision for NHS equipment (including rapid response ambulances, ventilators, and isolation pods) and played a vital role in supporting public sector organisations and corporates that are vital to the UK economy.

It is important that ESG risks and opportunities are taken into account to manage any associated risk to client’s money. Triple Point is continually reviewing and refining its approach to ESG issues and as signatories to the Principles of Investment (PRI) they are further demonstrating a commitment to responsible investment.

Over the next few years, it is clear that more clients will be faced with larger IHT bills. If they plan today, they will find a range of options to reduce and even nullify their IHT liability. Investing in unquoted trading companies which qualify for BR is an attractive option.  Leasing and lending represents a true diversifier which can benefit clients looking to invest for the future.  

Find out more about the Triple Point Estate Planning Service.

The Triple Point Estate Planning Service places capital at risk. As with any investment, there is no guarantee that the target return will be achieved and investors may get back less than the amount they invested. Past performance and forecasts are not a reliable indicator of future performance. Tax treatment depends on the individual circumstances of each client and is subject to change. Tax relief depends on the companies we invest in maintaining BPR qualifying status.