What is Business Relief?

Business Relief (BR) was introduced as part of the 1976 Finance Act in order to allow small businesses to be passed on through generations without incurring an Inheritance Tax (IHT) liability. The scope of BR has evolved over the years to become a method of investing for individuals looking to reduce a potentially large IHT liability at the time of their death.

Which companies qualify for BR?

The following types of companies qualify for BR:

Privately owned companies that are not listed on the main London Stock Exchange (LSE) and carry out a qualifying trade.

On the Alternative Investment Market (AIM) and carry out a qualifying trade.

Companies that do not typically qualify include mining, investment and property companies.

Is it possible to get pre-approval that a company will qualify for BR?

No, HMRC only ever considers a company's qualification for BR at death.

Does BR affect your nil rate band (NRB)?

BR planning does not affect the NRB, thus complementing and legislatively diversifying other Trust and Gift based IHT planning that does impact the NRB.

Will my investment be exempt from IHT?

Provided a qualifying BR investment is held for a minimum of two years, and at the time of death, it will not be subject to IHT in the event of the investor’s death.

How long does it take to become IHT exempt?

Unlike gifts and trusts, which typically take up to seven years before they are fully exempt from IHT, BR-qualifying investments are IHT exempt after just two years provided that the investments are still held at the time of death.

Do I retain control of my assets?

Unlike a trust-based plan, with a BR investment you maintain full control of and access to your money at all times. We aim to return monies within 15 working days upon request.

What if I have sold a qualifying business?

Qualifying BR investments can be switched to an alternative BR qualifying investment without restarting the two year clock - this is known as Replacement Property Provision (RPP).

Do I need to have a medical examination?

BR investments are relatively straightforward. Generally, there are no complex legal structures. There will not be a requirement for medical underwriting regardless of age or health.

The Foresight Accelerated Inheritance Tax Solution requires a terminal illness declaration be signed, as well as consent to the release of medical records, including any post-mortem examination as may be necessary to adjudicate any claim thereunder as is required.

Who might consider investing?

The Foresight Inheritance Tax Solutions may be of interest to a client who:

Wants to shelter their assets from inheritance tax while retaining access to their capital

Feels they have left estate planning too late

Has a power of attorney in place and wants to mitigate inheritance tax (note that investment via power of attorney not accepted in Accelerated ITS)

Has sold their business within the last three years

Has loan trusts and is concerned about the inheritance tax due on the initial capital

Would like to put more than the nil-rate band into a discretionary trust

Is a trustee looking to avoid periodic charges or exit charges

Holds cash and is looking for a better rate of return

Has IHT issues, but doesn’t feel ready to plan

What are the risks associated with BR investment?

The following risks are typically associated with a BR investment:

Tax rules are subject to change

If you do not hold the investment at the time of death, you will lose the tax exemption

Investing in small companies is inherently risky. These companies may not perform as hoped and in some circumstances may fail completely

Your capital is at risk; you may not get back as much as you put in and in the worst-case scenario you could lose all of your capital

BR investment should be considered as a longer-term investment and may be higher risk and more difficult to realise than other securities listed on the London Stock Exchange

What will the Foresight Inheritance Tax Solution invest into?

The Foresight Inheritance Tax Solutions aims to deliver modest returns by predominantly targeting infrastructure businesses, including solar power plants, onshore wind and battery storage projects. These businesses are ideal for estate planning solutions, typically providing returns derived from long-term contracted revenue streams with limited correlation to listed markets.

Are there any age limits?

There is no age limit for investment into the Foresight Inheritance Tax Solution, so it’s never too late or early to consider.

The Foresight Accelerated Inheritance Tax Solution does have age limits dependent on the Insurance Category selected (please see the Investor Guide for further information).

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Important Information: Capital is at risk. The value of an investment, and any income from it, can fall as well as rise and investors may not get back the full amount they invest. An investment in the fund should be considered a long term investment and may be higher risk and more difficult to realise than an investment in listed securities. Tax reliefs are dependent on investee companies continuing to qualify for Business Property Relief and investors’ individual circumstances. Current tax rules are subject to change. Past performance is not a reliable indicator of future performance. Foresight Group LLP does not provide advice and the information on this website should not be construed as such. We recommend investors seek advice from a regulated financial adviser. Investors should only invest in the Foresight Inheritance Tax Fund on the basis of information contained in the Investor Guide and Key Information Document.

Foresight Group LLP is authorised and regulated by the Financial Conduct Authority (FRN: 198020).