AIM Inheritance Tax Portfolio Service

Investing for the next generation

Whitman AIM Inheritance Tax (IHT) Portfolio Service

The Whitman AIM Inheritance Tax (IHT) Portfolio Service provides investors with exposure to a portfolio of growing and profitable companies listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

Our specialist team invests in companies on AIM that are expected to qualify for Business Relief (BR). Investment in such companies should receive relief from Inheritance Tax once held for a minimum of two years, as long as they are held at the date of death.

Investors in the AIM Portfolio retain full control of the assets, there are no entry or exit fees levied on the portfolio and all holdings are checked by an independent tax specialist to ensure they qualify for BR. Our service is a flexible investment option, enabling investors to make withdrawals should their financial circumstances change.

Our discretionary managed portfolio of AIM traded companies is held in separate, dedicated portfolios in the name of the client.

Our AIM Investment Process

Our investment team has over 40 years’ experience investing in AIM companies and focuses on established and profitable businesses. The team avoid highly speculative investments and the much smaller companies listed on AIM (with market capitalisations of below £100m), which typically have reduced levels of liquidity.

We seek to identify companies that have the potential to grow earnings and cashflows at an above average rate for a minimum of five years, and ideally much longer.

Once we have found a growth company, we have three key investment criteria:

Growing companies that possess all three attributes can re-invest self-generated cash at a high level of return. It is this cycle that delivers the most consistent and attractive growth in earnings. In our experience, exceptional management teams which consistently make excellent long-term capital allocation decisions are essential to the success of smaller companies.

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Whitman AIM IHT Service - Frequently Asked Questions

Business Relief (BR, formerly known as Business Property Relief) is a UK Government-approved relief from Inheritance Tax (IHT) introduced in 1976 as an incentive to invest in specific types of trading company, including many businesses listed on AIM. Eligible AIM shares held for a minimum of 2 years (and at the date of death) qualify for Business Relief and are exempt from IHT.

AIM was launched in 1995 and is the London Stock Exchange’s market for small and medium size growth companies. AIM has become attractive to a wide range of companies at different stages of development, including a number that have emerged to be leaders within their field and have become household names.

To qualify for Business Relief a company must undertake a trading activity and cannot have a listing on Recognised Investment Exchange (RIE). HMRC does not provide a list of qualifying companies and assesses each company retrospectively when a claim for relief is made.

The advantage of the service is its simplicity, providing one of the quickest and cost-effective means of reducing an Inheritance Tax liability whilst providing equity related returns. Unlike many other Inheritance Tax solutions, you retain full control and the ability to realise the assets at any time if circumstances change.

The service should be regarded as high-risk and only suitable for investors with financial security independent to the proposed investment. A summary of the key risks is highlighted below:

You may lose capital

The level of growth will depend on the performance of the equity market, in particular UK smaller companies. The value of your investment can go down as well as up, and you may not get back the full amount invested.

Tax rules may change

The tax benefit depends on the financial circumstances of each investor and may change at any time. Whilst we invest in companies we believe will qualify for Business Relief, we cannot guarantee that investments will qualify, or continue to qualify, for Business Relief.

Increased volatility and restricted liquidity

Investment in AIM shares will normally involve greater risk and are likely to be more volatile and less liquid than companies listed on the Main Market of the London Stock Exchange.

There is no maximum investment.

The 2-year holding period starts from the date each AIM investment is made rather than the date we receive funds.

Subject to market conditions and liquidity, the investments in the Whitman AIM service are usually made within 2 weeks of receiving cleared funds, starting the 2-year holding period as soon as possible.

Successive governments have recognised the value of Business Relief and in 2013 AIM shares became ISA eligible. Within an ISA wrapper, AIM shares are free from Capital Gains Tax, Income Tax and potentially Inheritance Tax (if held for at least 2 years and at the date of death).

If the proceeds from the sale of an existing Business Relief investment are reinvested into another qualifying asset the holding period for the initial investment does not restart. To qualify for Business Relief qualifying assets must be held for a minimum of 2 out of the last 5 years (and as at the date of death), providing investors with up to 3 years to reinvest the proceeds.

Providing the beneficial owner does not change, Business Relief assets can be sold from a General Investment Account (GIA) to fund an ISA subscription without restarting the 2-year holding period.

Providing the investment is sold before the company transfers to the Official List, the proceeds can be reinvested into another Business Relief company without re-starting the 2-year holding period.

Your AIM investments generate an income, but this is typically used to cover the costs of running the portfolio and any adviser fees. Any excess income is expected to be modest and can be distributed or reinvested. When dividends are reinvested, the new shares will start a 2-year qualifying period during which it will not be exempt from Inheritance Tax.

Whitman Asset Management are signatories of the Principles for Responsible Investment (PRI) and we take considerable interest in understanding how progressive our companies are in relation to ESG matters. The London Stock Exchange has recognised the importance of corporate governance and since 2018, AIM companies have been required to follow a recognised corporate governance code.

Partial, or full, withdrawals can be made at any time, but Business Relief only applies if the relevant shares are held for at least 2 years (and at the date of death).

A Power of Attorney (POA) can use the service as the donor, for whom the POA is acting, remains the beneficial owner of the AIM shares.

It is no longer possible to reduce the value of an estate for Inheritance Tax purposes by securing a loan to acquire assets that qualify for Business Relief.

If held for a minimum of 2 years, Business Relief assets can be transferred and providing the recipient continues to hold the shares (or replacement assets) at the date of death of the donor (or for a minimum of 7 years to qualify as a Potentially Exempt Transfer) the gift will be exempt from Inheritance Tax. Upon transfer any gain will be subject to Capital Gains Tax (spousal transfers are exempt from CGT) and if elected, hold-over relief is available so that CGT is payable when the recipient sales the shares.

All holdings in the Whitman AIM service are independently reviewed by a tax specialist to ensure they should qualify for Business Relief. Since the inception of the service, Whitman has not been notified of any instances of Business Relief not being granted.

When you pass away your executors, or financial adviser, will notify us and may request a probate valuation, at which stage, we will confirm which stocks qualify for Business Relief.

The book costs will be updated to reflect the probate valuation and the account status will move from discretionary to execution only. As part of the probate process your executors should provide details of the AIM portfolio to HMRC by completing Schedule IHT412.
If we receive signed instruction from the executors, the portfolio can be sold prior to grant of probate to remove the market risk or make a transfer to HMRC under the ‘Direct Payment Scheme’.

If at the date of death, the 2-year holding period is not met, the portfolio can be transferred to the surviving spouse without restarting the holding period. Note Business Relief assets qualify as an exempt transfer and do not utilise the nil rate IHT band.

Once probate has been granted, AIM shares can be transferred to the beneficiaries and the book cost will be probate value as at the date of death. If the beneficiary is the surviving spouse this does not re-start the requisite 2-year holding period for Business Relief. For all other beneficiaries the 2-year holding period starts from the date of death of the donor.

When an individual holding an ISA dies the surviving spouse is entitled to an additional ISA allowance Additional Permitted Subscription) equal to the higher value of the ISA held by their spouse at the date of death or transfer.

The residence nil rate band (RNRB) provides an additional rate band if the main residence is left to direct descendants on death. The RNRB is tapered once the net asset value of the estate is above £2 million and Business Relief is not deductible against this threshold.

Disclaimer: Although Whitman uses all reasonable skill and care in compiling this information no warranty is given as to its accuracy or completeness. The opinions expressed accurately reflect the views of Whitman at the date of this document based on our views at such time regarding market conditions and other factors, may depend upon assumptions or projections that may not prove to be correct, and are subject to change. The opinions stated are honestly held, they are not guarantees and should not be relied upon.

The value of investments may fall as well as rise and your capital is at risk. We strongly recommend that you seek professional advice before you consider making investments is such securities. AIM has less stringent rules and AIM company shares may be less liquid than those companies listed on the London Stock Exchange.

Current tax rules and the available tax reliefs offered on investments into AIM-quoted stocks may change at any time, and there is a considerable risk that if the legislation changed in respect of these tax reliefs, then those stocks that no longer qualified for such reliefs would be subject to heavy selling pressure, potentially leading to significant investment losses.

The value of investments may fall as well as rise and your capital is at risk. Information on past performance, where given, is not necessarily a guide to future performance.