Impact Investing: doing well by doing good
10 December 19
10 December 19
In amongst the minced pies and mulled wine, the festive period is typically one of the few times of the year when the entire family gets together. This can be an opportune time to take a moment to discuss the family’s estate planning. The timing fits nicely around annual conversations with accountants and financial advisers, and Q1 is usually an extremely busy time for IHT planning and investments.
The complexities of Inheritance Tax (IHT) can be confusing to understand and awkward to plan for. As a consequence, every year a growing number of families end up paying large IHT bills that could have been legitimately mitigated It is clear that financial planning is key, and below we examine the question: what if there was a way to mitigate IHT and benefit from an attractive trade, uncorrelated to equity markets?
IHT bills have been steadily rising since 2009, as a result of the government freezing the £325,000 threshold, known as the nil-rate band, above which the 40% tax is charged on estates. In 2018, the number of estates paying inheritance tax rose again, as the UK government’s receipts for the tax climbed to a staggering £5.4 billion. According to data published in May 2019, the average Inheritance Tax bill was around £200,000 at the end of the previous tax year.
With the ever-growing concern that clients’ estates may have large inheritance tax bills, the ability to plan in advance has become a valuable focal point in the advice process.
Business Relief (BR) has been part of inheritance tax legislation since 1976. As an investment incentive it’s simple and straightforward. BR enables assets to obtain relief faster than trusts or gifts and, most importantly, is done in the client’s name so there is no loss of control for the investor over their capital.
Assets that qualify for Business Relief include trading businesses and certain qualifying companies quoted on AIM. If you hold shares in qualifying businesses for a minimum of two years at the date of death, the shares may qualify for BR, and therefore not be liable for any IHT. However, it is critical that advisers think carefully about the right type of BR solution for their clients, including the sectors that will be invested in, and the experience of the provider. Care is needed - this is a market in which a client’s funds, often earned over a lifetime of work, can be put at risk.
Unquoted trading companies can be a smart option to mitigate IHT for those targeting returns that are uncorrelated to equity markets or geopolitical factors. They tend to respond to changes gradually, rather than experience abrupt movements in value.
Triple Point’s approach is to target business relief 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.
By way of example, last year our strategies provided: £18m to the NHS to acquire new ambulance fleets, £13.5m to local authorities to fund social housing projects, and £67m across 88,000 SMEs for payment card terminals.
Triple Point gives investors access to this unique deal flow through the Estate Planning Service ("TPEPS"). The Service was launched in 2013, offering investors two alternative core strategies, each with compelling track records of delivering solid on-target returns, year after year (though remember: past performance should not be used as a guide to future performance).
TPEPS enables private investors to access the commercially attractive trades of leasing and lending, by participating in the following two businesses:
TP Leasing Ltd (‘TPLL’) is a leasing, lending and infrastructure finance business. It focuses on providing a smaller number of higher value leases to good quality counterparties. For example, MRI scanners or ambulances to NHS Trusts, or assets such as refuse collection vehicles to local authorities. The target return to Triple Point’s clients is 1.5% to 2.5% p.a. (after annual fees).
Navigator Trading Ltd (‘NTL’) provides a variety of different types of funding to UK based small and medium-sized enterprises (SMEs). It focuses on providing large numbers of smaller leases and loans, to a diverse spread of businesses, and manages risk by carefully analysing the underlying deals and taking account of anticipated losses in advance. Just like TP Leasing Ltd, NTL has demonstrated consistent returns year after year, delivering annualised returns to Triple Point clients comfortably within its 4.0% to 6.0% target p.a. (after annual fees).
Once again, please remember that capital is at risk and past performance should not be used as a guide to future performance.
Triple Point’s award-winning Estate Planning Service ("TPEPS") can provide individual investors and trusts with 100% relief from inheritance tax after two years. Since it launched, our Estate Planning Service has consistently provided solid and stable returns to investors from our diverse portfolio of lease and loan contracts, additionally providing investment exposure that is decoupled and uncorrelated with traditional equity markets.
Hot on the tail of winning ‘Specialist Lender of the Year’ at the Growth Finance Awards 2019, last month Triple Point won ‘Best BR Manager Unlisted’ at the Growth Investor Awards 2019. These awards recognise a truly unique service, marrying dependable performance with impactful and positive UK investments
If you have any further questions about our Estate Planning Service, or any of our other investment solutions, which include our Impact EIS Service and Venture Fund VCT, please get in touch on 020 7201 8990.
Risk Warning: The Triple Point Estate Planning Service places investors’ capital at risk. As with any investment, there is no guarantee that target returns will be achieved and investors may get back less than the amount they invested. Past performance and forecasts are not reliable indicators of future performance. Tax treatment depends individual circumstances and is subject to change.
Triple Point is the trading name for the Triple Point Group which includes the following companies and associated entities: Triple Point Investment Management LLP is authorised and regulated by the Financial Conduct Authority no. 456597. This financial promotion has been issued by Triple Point Administration LLP which is authorised and regulated by the Financial Conduct Authority no. 618187.