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What is Business Relief?

Business Relief (BR) is an established relief that allows certain investments to be left to loved ones free from inheritance tax. Compared to options like gifting, it can offer a faster solution to inheritance tax and doesn’t put capital permanently out of reach.

What are the reasons to invest?

Fast inheritance tax exemption

BR-qualifying investments can be free from inheritance tax after just two years.

Access and control

Investors retain access to their wealth and can request to sell their shares at any time, subject to liquidity.

Growth

BR-qualifying investments give investors the opportunity to grow their capital, with a range of products available to suit different appetites.

Points to consider

An inheritance tax service that invests in unquoted Business Relief-qualifying companies selects businesses that are not listed on any stock exchange. These typically target a steady, predictable return.

AIM inheritance tax services invest in Business Relief-qualifying companies that are listed on the AIM market. While they offer the potential for high growth, smaller and unquoted companies can be more volatile than companies listed on the main market of the stock exchange. This includes AIM listed stocks.

An Octopus AIM inheritance Tax ISA is likely to be higher risk than more mainstream stocks and shares ISAs.

What is the Enterprise Investment Scheme?

Investors in an EIS portfolio own shares directly in a portfolio of early-stage companies. EIS typically appeals to experienced investors who want to back companies with high growth potential. Investors can claim generous tax reliefs because of the risks involved, which include loss relief when an underlying investment returns less than they invested.

What are the reasons to invest?

High growth potential

Access to high-risk opportunities with the potential for high growth.

Tax reliefs

Reliefs include upfront income tax relief, tax-free growth, loss relief, capital gains tax deferral, and inheritance tax relief.

Diversification

Access early-stage companies investors wouldn’t hold in a mainstream investment.

Points to consider

An EIS portfolio invests in small early-stage companies. The combination of tax reliefs available makes an EIS-qualifying portfolio a compelling structure through which to target high growth. 

Investors must hold shares for a minimum of three years to keep any tax reliefs claimed and should be prepared to hold their shares for significantly longer to allow time for growth and liquidity. 

If your client is looking for relief from inheritance tax, please consider the longer time horizons and additional risks that come with EIS investments. In some cases, EIS investments will not be the most suitable option for a client planning for inheritance tax, especially if they wish to target predictable returns.