Under current legislation bequests made to a
deceasedís spouse or to recognised charities escapes inheritance tax (IHT).
Otherwise the first £325,000 (frozen until 2015) of assets bequeathed on
death attracts no IHT and everything over this figure attracts tax at 40%.
An exemption to this are shares in companies
that qualify for Business Property Relief (Business Assets). Companies that
qualify for such relief are those that are not listed on a recognised Stock
Exchange. Most importantly the AIM and OFEX (now called PLUS Quoted) markets
are not recognised stock exchanges for this purpose, although companies
utilising these platforms are quoted and may be traded. Business assets are:
Exempt from IHT if the initial investments into AIM and PLUS Quoted
securities were purchased at least two years before the time of death
and remained in AIM or PLUS Quoted securities up to the date of death.
Subject to capital gains tax (CGT) at 18% for basic rate taxpayers and
28% for higher rate taxpayers on gains in excess of the annual exemption
(£10,900 for 2013/2014). Where a gain is large enough to take someone
over the higher rate income tax threshold, the 28% rate will apply to
There are some AIM and PLUS Quoted companies
that currently do not qualify for these reliefs, these include companies
dealing in property, investments and general financial instruments (i.e.
investment companies) and cash shells.
There are over 1,000 companies listed on AIM, as
at January 2013. This makes it possible for us to create and manage a
portfolio to take advantage of these far reaching tax breaks.
We do have to point out that AIM and PLUS Quoted
securities are regarded as high risk and trading liquidity cannot be
guaranteed. Investors should only contemplate investing in such equities if
they can afford to lose any of the capital committed.
We believe the higher risk nature of AIM and
PLUS Quoted investing makes it essential to have a broad spread of companies
that have been researched and are regularly monitored. Over the past several
years we have put together a core universe of companies from which we select
for IHT mitigation portfolios. These companies are regularly appraised and
added to when appropriate opportunities arise.