For Professional Advisers. Not for Retail Clients.
MAY
2014
abc INVESTMENTS
IN THIS ISSUE
WELCOME TO THE MAY ISSUE
Industry News
Financial Planning
for...
MONTHLY UPDATE
The Budget 2014 has created a great deal of interest within the financial planning profession, as
advisers begin to consider the implications of the upcoming changes. With the tax system growing
ever more complex, so does the role of the financial planner and in the latest edition of our newsletter
we break down how Business Property Relief (BPR) qualifying assets can potentially mitigate a client’s
Inheritance Tax (IHT) exposure.
Current Investment
Opportunities
Included in this issue, Edward Grant, FPFS and Chartered Financial Planner, examines the IHT
allowances, exemptions and reliefs available to investors and the role of the financial planner in
creating a coherent and effective plan.
Investment Focus
Matt Dickens, Chartered Wealth Manager, continues his Financial Planning for… section focusing on
how BPR qualifying assets can potentially mitigate a client’s IHT exposure, with worked examples of
how this can be executed.
In this month’s Investment Focus section, Jeremy Milne, Investment Director and manager for Ingenious
Renewable Energy EIS 2, looks at the effects of this year’s Budget announcement on investing in
renewable energy and the benefits of making an investment prior to the changes taking place.
Investing in Renewable Energy Webinar
We are also pleased to invite you to our Investing in Renewable Energy webinar, hosted by Jeremy Milne,
Investment Director and manager for Ingenious Renewable Energy EIS 2. The webinar is taking place
on Wednesday 14 May at 14.30. To register your attendance, please click here.
For further information about our investment opportunities or if you would like us to attend any client
meetings and assist with completing the application process, please contact our Client Relationship
Team on 020 7319 4000 or clientservices@ingeniousmedia.co.uk
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abc CLEAN ENERGY
abc REAL ESTATE
abc INVESTMENTS
MONTHLY UPDATE
INDUSTRY NEWS
Allowances, Exemptions and Reliefs
Edward Grant, Investment Director
T
he Budget 2014 has created a great deal of interest
within the financial planning profession, as advisers
begin to consider the implications of the removal of the
need to purchase a pension annuity when considering
retirement options. This is a positive development, as
individuals will have greater freedom in their retirement,
although the Chancellor also announced the minimum
retirement age would rise to 57 by 2028.
We also heard that the ISA allowance would rise to £15,000.
This is a valuable allowance, which has a cumulative
effect and has been at the centre of advisers’ financial
planning recommendations.
Unfortunately the Budget did not bring such good news for
those with a potential Inheritance Tax (IHT) exposure, as the
nil rate band remains frozen at £325,000 until 2017/18,
which will continue to draw many estates into the IHT net.
As with all financial planning it is important to consider the
available IHT allowances, exemptions and reliefs. When
considering an IHT strategy, financial planners start by
ensuring that the clients have written a valid will and then
utilised their allowances, exemptions and reliefs before
lending or gifting assets.
According to the National Audit Office1 there are 1,128 tax
reliefs in the UK tax system. Although there are 88 IHT reliefs,
the most frequently used IHT exemptions, which individuals
can benefit from, are:
• Annual exemption – each individual can give £3,000 per
annum and also use the previous year’s exemption if
not already used
• Small gift exemption – up to £250 can be gifted to any
number of individuals (but cannot be combined with the
annual exemption)
• Normal expenditure out of income – gift can be made
from surplus taxable income provided it does not affect
the donor’s standard of living
The latest HMRC IHT statistics2 reveal that in 2010/11 there
were 28,043 estates which exceeded the available nil rate
band on death. Whilst the majority, over 83%, were exempt
from IHT as they were covered by the surviving spouse
and charities exemptions, 1,297 benefited from Business
Property Relief3 (BPR).
2
BPR was introduced in the Inheritance Tax Act 1984, and is
available at 100% for transfers during lifetime and on death
in respect of:
• A business or an interest in a business (such as a sole
trade or an interest in a partnership)
• Unquoted securities, which by themselves or in
conjunction with other such securities or unquoted
shares give the transferor control of a company
• Any unquoted shares in a company (including shares
in Enterprise Investment Scheme (EIS) qualifying
companies)
According to the National Audit Office the value of BPR
claims has grown significantly in recent years, accounting
for £150 million in 2008/09 and rising to £385 million
in 2012/131.
Clients can benefit from 100% BPR after they have held
shares in an Ingenious EIS opportunity or Ingenious Estate
Planning for two years (or immediately if an investor qualifies
for ‘replacement BPR’).
With such a complex tax system, the role of the financial
planner guiding their clients through the allowances,
exemptions and reliefs becomes central to a coherent and
effective plan, demonstrating the value of advice.
For further information about the Ingenious Estate
Planning solution please visit www.ingeniousmedia.co.uk/
estateplanning or contact a member of the Ingenious Client
Relationship team on 020 7319 4000 or clientservices@
ingeniousmedia.co.uk
Edward Grant FPFS, Chartered Financial Planner, is an
Investment Director in the Client Relationship Team. If you
would like to discuss any of your financial planning matters
with him directly, please contact him on 020 7319 4283 or
edward.grant@ingeniousmedia.co.uk
Sources:
1
2
3
National Audit Office Tax Reliefs – 7 April 2014.
HMRC: Inheritance Tax Statistics 2010-11 - 31 July 2013.
12.2 Inheritance tax - Exemptions and reliefs 11 July 2013.
abc INVESTMENTS
MONTHLY UPDATE
FINANCIAL PLANNING FOR...
Potential Inheritance Tax Exposure
Matt Dickens, Investment Director
T
his month I will consider two examples of how the
use of Business Property Relief (BPR) qualifying
assets can potentially mitigate a client’s Inheritance Tax
(IHT) exposure.
As we covered last month, any part of a client’s estate which
exceeds the nil rate band (NRB) of £325,000 is subject to
IHT when they die. However, this doesn’t apply to assets
that qualify for BPR.
BPR is a tax relief provided by the UK government as an
incentive for investing into businesses and to protect those
businesses from having to be broken up in order to pay IHT. It
provides a potential 100% reduction in the value chargeable
to IHT, where that value is attributable to “relevant
business property”, once that property has been held for a
minimum of two years.
Examples of relevant business property include, but are
not limited to, shares in an unquoted trading company
(which qualify for BPR at 100%) and land, buildings, plant or
machinery used by a partnership of which the individual is a
member (which qualify for BPR at 50%).
Example 1
A couple in their mid-seventies are looking to conduct some
proactive estate planning as they have calculated that their
current estate is worth significantly more than their combined
NRBs. However, without knowing exactly how much of their
capital they will require during the rest of their lives, they may
be naturally reluctant to give up the ownership of their assets
through gifting them away or putting them into trust.
They could decide to make an investment into BPR qualifying
assets which will be 100% free from IHT after just two years,
while allowing them to maintain control over their assets.
They would also receive any of the benefits that those shares
may bring, along with the possibility of being able to take an
“income” from the investment through incremental disposal
of the shares.
Alternatively, if the couple could benefit from any of the
associated 30% income tax relief (i.e. have other sources
of taxable income) and don’t require such a high degree of
liquidity, they could choose to invest some or all of their assets
into Enterprise Investment Scheme (EIS) qualifying shares,
that would also achieve BPR qualifying status in exactly the
same period. When the EIS investment is realised, the client
then only has to reinvest within three years into another BPR
qualifying investment and the IHT relief is retained.
Worked Examples
The table below shows the effectiveness of electing to invest
in BPR qualifying assets. The couple above decide to mitigate
their IHT exposure by investing their bonds and ISAs and half
of their cash into 100% BPR qualifying investments.
They still maintain the control of the assets, and are able to
utilise any benefit derived from those assets, but are able to
reduce their IHT exposure to one fifth of the original amount.
Without BPR
Asset
Primary Residence
ISAs
Bonds
Cash
Total Assets
Estate Liable to
IHT above NRB
IHT Liability
Value in
£000
650
100
200
200
1150
500
200
With BPR after 2 years
Value in
Asset
£000
Primary Residence
650
BPR qualifying assets
400
Cash
100
Total Assets
Estate Liable to
IHT above NRB
IHT Liability
1150
100
40
Example 2
In the second example we consider a client who has a
need to dispose of an investment property before they can
conduct some proactive IHT planning, as the value of their
estate is over the NRB.
Normally this sale would potentially give rise to a capital
gains tax (CGT) charge. Nonetheless if the client elects to
reinvest the gain into an EIS investment, the payment of this
CGT liability is deferred for the life of the EIS investment
(i.e. broadly, until the shares are disposed of).
Furthermore, if an investor dies during the life of the EIS
investment, any deferred capital gains will not come back
into charge.
Next month, I will switch my attention to the growing issue of
long term care here in the UK, and some of the ways we can
preemptively plan for this eventuality.
Matt Dickens is an Investment Director in the Client
Relationship Team, a Chartered Wealth Manager and member
of the CISI. If you would like to discuss any of your financial
planning matters with him directly, please contact him
on 020 7319 4260 or matt.dickens@ingeniousmedia.co.uk
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abc INVESTMENTS
MONTHLY UPDATE
CURRENT INVESTMENT OPPORTUNITIES
Enterprise Investment Scheme
Shelley Media EIS 10
Shelley Media EIS 10 presents an exciting opportunity to invest in EIS qualifying
companies creating and producing film, television and video game content
for the global market.
• Targeted tax free growth between 8-18% per annum
• Minimum investment £10,000
• Subscription deadline of 21 July 2014
Ingenious Renewable Energy EIS 2
Ingenious Renewable Energy EIS 2 offers a compelling opportunity to
invest in EIS qualifying companies which acquire and operate renewable
energy generation facilities.
• Targeted tax free growth between 15-20% per annum
• Minimum investment £10,000
• Subscription deadline of 30 June 2014
Inheritance Tax
Ingenious Estate Planning
Ingenious Estate Planning offers investors the opportunity to obtain 100%
inheritance tax relief after only 2 years.
• Flexible investment strategy
• Minimum investment £50,000
• Open ended offer
The above targeted returns are illustrative only and are based on a number of assumptions. These targeted returns may not be a reliable indicator of future performance.
The value of an investment in the above opportunities can go down as well as up and investors may not get back the full amount invested.
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abc RENEWABLE ENERGY EIS 2
“In our view Investors will be better
served by investing with larger
providers such as Ingenious […] as
we believe that better priced exits
might be achieved by such providers,
and our rating reflects our view”
“Tax Efficient Review rating:
86 out of 100“
Martin Churchill Tax Efficient Review – February 2014
Following a successful fund raise for
Ingenious Renewable Energy EIS 2 prior to 1 April 2014, we have
decided to extend the Subscription Deadline until 30 June 2014. We
have secured additional investment capacity and all the investee
companies benefit from HMRC Advance Assurance.
For further information on Ingenious Renewable Energy EIS 2 or to receive a copy of the Martin Churchill
Tax Efficient Review, please contact Jeremy Milne or a member of our Client Relationship team on
020 7319 4000 or clientservices@ingeniousmedia.co.uk
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abc INVESTMENTS
MONTHLY UPDATE
INVESTMENT FOCUS
Last Chance in the Sun
Jeremy Milne, Investment Director
C
hancellor George Osborne was just a lad in shorts when
Elton John sang “Don’t let the sun go down on me” in
1974, yet 40 years on the Chancellor effectively signalled
the end to the “sunshine” investment opportunity
that has caught the imagination of private Enterprise
Investment Scheme (EIS) and Venture Capital Trust (VCT)
investors.
Since 2010, the opportunity has existed to invest in EIS
qualifying companies owning and operating solar farms and
wind farms. One of the most attractive aspects of these
investments is the highly dependable income streams with
long term government support from Renewable Obligation
Certificates. The EIS/VCT investor is able to buy into
companies with highly stable cash flows and benefit from
tax relief at the same time. This lifts the projected return to
investors in many opportunities to “double digit” annualised
tax free returns, as long as the investor is prepared to tie up
their cash for a minimum of three years.
The changes proposed by the Chancellor will become
clearer when the legislation for the Finance Bill 2014
receives Royal Assent in the summer. However, based on
current understanding, the opportunity for EIS qualifying
companies in renewable energy markets to benefit from
Renewable Obligation Certificates is highly unlikely to
exist after this time.
Ingenious Renewable Energy EIS 2 will close on 30 June 2014
after completing its £35m fund raise into EIS qualifying
companies that will be acquiring solar farms during 2014.
The key date for investors is the date of share issue – shares
in the underlying EIS companies must be allotted before
the date of Royal Assent. This date has historically been
in mid‑to-late July. Ingenious will use its best endeavours
to ensure that all shares are allotted prior to the key date,
allowing investors to enjoy their last chance in the sun.
For those who are still scratching their heads and wondering
if this is a “trick of the light”, they should be aware of the
following. The EIS and VCT legislation is often subject to
change and HM Treasury historically signals its intention to
make changes to allow investors time to make the necessary
adjustments to their investment activity. At Ingenious we see
this as business as usual and investors and advisers should
take the opportunity to reassess their 2014/15 investments
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accordingly. In addition, HM Treasury has never
retrospectively withdrawn EIS or VCT tax relief for investors
who have followed the rules laid down in announcements
or in legislation.
So what does all this mean for the private investor and their
adviser? Investors who are planning to make an investment
before 5 April 2015 may wish to consider bringing forward
their investment to take advantage of this opportunity, which
will not exist in April 2015. This may include investors who
have not used all of their EIS investment capacity in 2013/14.
Those investors with balanced portfolios of EIS investments
may want to rebalance towards renewables in the short term,
knowing that this investment opportunity will change in the
future, allowing rebalancing back in subsequent years. As
Mae West said, “Too much of a good thing can be wonderful”.
Jeremy Milne is an Investment Director within the Clean Energy
team responsible for the Ingenious Renewable Energy
EIS. For further information on our current opportunity,
Ingenious Renewable Energy EIS 2, please contact
Jeremy or a member of our Client Relationship team on
020 7319 4000 or clientservices@ingeniousmedia.co.uk
Client Relationship Team
Ian Anderson Director
020 7319 4126
ian.anderson@ingeniousmedia.co.uk
Chris Cylwik Investment Manager
020 7319 4083
chris.cylwik@ingeniousmedia.co.uk
Hannah Topps Investment Manager
020 7319 4098
hannah.topps@ingeniousmedia.co.uk
Matthew Bugden Director
020 7319 4102
matthew.bugden@ingeniousmedia.co.uk
Justin Elmes Investment Manager
020 7319 4257
justin.elmes@ingeniousmedia.co.uk
Camilla Vasa Investment Manager
020 7319 4066
camilla.vasa@ingeniousmedia.co.uk
Russell Jarvis Senior Investment Director
020 7319 4280
russell.jarvis@ingeniousmedia.co.uk
Daniel Hood Investment Manager
020 7319 4259
daniel.hood@ingeniousmedia.co.uk
Rosalind Whitehead Investment Manager
020 7319 4110
rosalind.whitehead@ingeniousmedia.co.uk
Gabrielle Beaumont Investment Director
020 7319 4129
gabrielle.beaumont@ingeniousmedia.co.uk
Daniela Jaume Investment Manager
020 7319 4093
daniela.jaume@ingeniousmedia.co.uk
Edward Batchelor Investment Associate
020 7319 4275
edward.batchelor@ingeniousmedia.co.uk
Matthew Dickens Investment Director
020 7319 4260
matt.dickens@ingeniousmedia.co.uk
Ben Mitchell Investment Manager
020 7319 4140
ben.mitchell@ingeniousmedia.co.uk
Benjamin Brown Investment Associate
020 7319 4276
benjamin.brown@ingeniousmedia.co.uk
Edward Grant Investment Director
020 7319 4283
edward.grant@ingeniousmedia.co.uk
Patrick Morton Investment Manager
020 7319 4122
patrick.morton@ingeniousmedia.co.uk
William Colville Investment Associate
020 7319 4106
william.colville@ingeniousmedia.co.uk
Siobhan Griffin Investment Director
020 7319 4132
siobhan.griffin@ingeniousmedia.co.uk
Richard Nichol Investment Manager
020 7319 4035
richard.nichol@ingeniousmedia.co.uk
Elizabeth Feltwell Investment Associate
020 7319 4118
elizabeth.feltwell@ingeniousmedia.co.uk
Simon Harryman Investment Director
020 7319 4146
simon.harryman@ingeniousmedia.co.uk
Eileen Redmond Investment Manager
020 7319 4078
eileen.redmond@ingeniousmedia.co.uk
Jamie Jones Investment Associate
020 7319 4075
jamie.jones@ingeniousmedia.co.uk
Stella Smith Investment Director
020 7319 4131
stella.smith@ingeniousmedia.co.uk
Patrick Thorp Investment Manager
020 7319 4141
patrick.thorp@ingeniousmedia.co.uk
Kathleen Plunkett Investment Associate
020 7319 4090
kathleen.plunkett@ingeniousmedia.co.uk
Elizabeth Blackledge Investment Manager
020 7319 4135
elizabeth.blackledge@ingeniousmedia.co.uk
Guy Tompkin Investment Manager
020 7319 4134
guy.tompkin@ingeniousmedia.co.uk
Adam Reeve Investment Associate
020 7319 4039
adam.reeve@ingeniousmedia.co.uk
Ingenious Capital Management Limited (including the trading divisions Ingenious Clean Energy, Ingenious Media, Ingenious Real Estate and Ingenious
Ventures) and Ingenious Media Investments Limited are authorised and regulated by the Financial Conduct Authority. Registered in England and Wales.
Registered office: 15 Golden Square, London W1F 9JG, UK.
This document has been prepared for information purposes only and does not constitute a financial promotion in accordance with section 21 of the
Financial Services and Markets Act 2000. This information does not constitute or form part of any offer for sale or solicitation of any offer to buy or
subscribe for any securities or investment services. Nothing in this document constitutes investment, tax, legal or other advice by any Ingenious group
entity. Any references to tax laws or levels in this document are subject to change. Past performance is not a guide to future performance and may
not be repeated.
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