Under current legislation bequests made to a
deceasedís spouse or to recognised charities escapes inheritance tax (IHT).
Otherwise the first £325,000 (frozen until April 2018) of assets bequeathed
on death attracts no IHT and everything over this figure attracts tax at
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 (£11,000 for 2014/2015). Where a gain is
large enough to take someone over the higher rate income tax threshold,
the 28% rate will apply to the excess.
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 April 2014. 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.