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Is your ISA at risk of a 40% Inheritance Tax charge?

If you are one of those people who have been saving into an ISA throughout your working life, then you are most likely to be in the fortunate position of having grown this investment into a significant asset. Investing into an ISA was a good move as it offers you tax-free growth and income on your savings. So far so good. However, if you are at the stage in life where you ought to be considering your estate for Inheritance Tax (IHT) then you may have an issue.

An ISA can be liable to a 40% claim by the taxman through Inheritance Tax at the time of your death, significantly reducing the value of your estate and the amount of assets that will pass to your loved ones.

What can you do about this?

One proven and simple solution is to transfer your existing ISA into an AIM IHT ISA managed by an experienced investment team. This could allow you to:

  • mitigate 100% potential Inheritance Tax if held for two years and on death
  • benefit from the leading growth potential offered by AIM as one of the world’s leading growth markets
  • continue to benefit from tax-free income and growth within the ISA wrapper
  • retain control of your assets- you can make withdrawals if needed

You can find out more about the benefits of investing in AIM for IHT planning purposes in our free report available from the link here.

Interested in hearing more about how AIM for IHT works? Then why not watch our webinar session named All you need to know about investing in AIM for inheritance Tax where we delve into the subject in more detail.

AIM, London’s growth market, has materially outperformed the UK main stock market for a number of years, reflected in the very strong performance of AIM for IHT planning portfolios.

The Fundamental AIM IHT Portfolio is a discretionary investment management service where clients can obtain 100% mitigation from Inheritance Tax, benefit from the capital growth afforded by the AIM market and retain control of their assets.

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 17 years, from the link here.

 

AIM IHT ISAs can be higher risk, more volatile and less liquid when compared to conventional ISAs. Tax rules can change and benefits depend upon circumstances.


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IHT receipts up a staggering 54% for April and May compared to the same period in 2020

Inheritance Tax (IHT) receipts were up an incredible 54% for April and May compared to the same period in 2020. Good news for the Chancellor, bad news for those looking to reduce IHT!

These figures are according to data published in a recent HM Revenue & Customs bulletin. The report confirms that full-year IHT receipts for 2020-2021 amounted to £5,326 million, a £204 million increase from the year before. In fact, for the period of April 2021 to May 2021, total receipts amounted to £966 million, an increase of £340 million on the same period last year.

What could be the reason for this?

In the report, HMRC stated that the increase could be due to “high volumes of wealth transfers that took place during the Covid-19 pandemic”. However, they cannot verify this until more data becomes available.

Another reason could be recent tax freezes, imposed earlier this year in the Spring Budget by Chancellor of the Exchequer Rishi Sunak. The Chancellor announced that both the nil-rate band (NRB) and residential nil-rate band (RNRB) will be frozen until April 2026, resulting in the NRB remaining at £325,000 and the RNRB at £175,000 during this time.

In practice, more and more people will find themselves with an IHT issue as asset prices rise with inflation and IHT allowances remain fixed. Some have referred to these measures as a ‘stealth’ tax mechanism that will, over time, bring significant tax receipts for the Treasury.

Concern is beginning to grow over the possibility that IHT and CGT liabilities could be increased as the government continues to consider its options to recover debt incurred by the pandemic.

One proven, simple solution to mitigate potential IHT, and also benefit from ongoing capital growth, is through investment in the shares of qualifying AIM companies.

You can find out more about the benefits of investing in AIM for IHT planning purposes in our free report available from the link here.

AIM, London’s growth market, has materially outperformed the UK main stock market for a number of years, reflected in the very strong performance of AIM for IHT planning portfolios.

The Fundamental AIM IHT Portfolio is a discretionary investment management service where clients can obtain 100% mitigation from Inheritance Tax, benefit from the capital growth afforded by the AIM market and retain control of their assets.

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 17 years, from the link here.


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Sold a business in the last 3 years and now with an Inheritance Tax issue?

Shares in a business which qualify for Business Property Relief (BPR) can benefit from 100% Inheritance Tax mitigation if held for two years and until death.

Many businesses in the UK qualify for this relief and many businesses rely on this exemption to pass their family-owned business down to children or other beneficiaries, free of Inheritance Tax. If that business were to instead be sold, then the proceeds of that sale would lose that exemption.

It may be the case that a business owner does not have any children, or anyone else they would like to leave the business to, and so selling might be the favoured option.

A BPR qualifying asset can be sold and reinvested into another BPR qualifying asset/s within 3 years of that sale, retaining the BPR status immediately and without re-setting the 2-year clock needed to obtain the exemption. Importantly, during those 3 years, or a period up to those 3 years, the proceeds while not invested in a BPR qualifying asset will not be exempt.

Consider a quick example

John is a widower whose health has recently deteriorated. He sold his business two years ago for £3 million. He has decided to use half of the proceeds to fund his retirement and would like to leave the rest to his two sons. He is aware that this will incur a significant Inheritance Tax bill on his death and is looking at ways to reduce this.

Some more traditional forms of estate planning such as gifts and trusts may not be suitable because they will take seven years before becoming free from Inheritance Tax and this may be unrealistic given John’s poor health.

John’s financial adviser explains to him that the shares in his business qualified for BPR which means he could have left them to his sons free from Inheritance Tax. However, he chose to sell the business and so in the current situation those proceeds will be subject to Inheritance Tax due to the size of his estate.

What is the solution?

John’s adviser suggests he invests the proceeds of the sale of his business into an AIM portfolio service. As John only sold the business 2 years ago he is within the 3 year window where he can re-invest the proceeds into a BPR qualifying asset/s for immediate Inheritance Tax mitigation, without the need to hold the assets for another 2 years.

AIM is one of the world’s most successful growth markets. To hear more about the success of AIM as a growth market watch our session Another record-breaking year for AIM but what for 2021?

A further benefit is that the investment will remain in John’s name and so he will be able to make withdrawals should he need the funds for something in the future.

The Fundamental AIM IHT Portfolio is a discretionary investment management service where clients can obtain 100% mitigation from Inheritance Tax, benefit from the capital growth afforded by the AIM market and retain control of their assets.

To hear the many other ways BPR qualifying assets can help your clients’ Inheritance Tax planning watch our session How can AIM help you and your clients?

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 17 years, from the link here.


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Fundamental Asset AIM for positive & sustainable growth- Explained!

Fundamental Asset Management was recently featured in What Investment after our decision to broaden our investment mandate and introduce positive & sustainable growth into our AIM IHT portfolio. (Read the full article here).

There are two improvements this brings. Firstly, it widens our remit and therefore our opportunity for growth. And secondly, it allows us to create a dedicated positive & sustainable version of our AIM IHT portfolio for clients that require this type of mandate (subject to a minimum).

The opportunity for growth

It’s important to understand that this is not a change of the management style of our successful AIM for IHT portfolio service which has recently had its top quartile performance over 1,3,5 & 10 years confirmed by MICAP (Read the full report here). Instead, it is a broadening of our investment remit to take advantage of the growth opportunity which positive and sustainable investing presents.

There are many examples of the opportunities to be found here including within healthcare, energy storage and renewables. We have, up to now, avoided earlier stage, smaller, non-profitable companies in these sectors, due to the perceived heightened risk of these types of business. However, these types of ‘new economy’ businesses have performed strongly over recent years, have attracted significant amounts of capital and are therefore well-funded to commercialisation. Importantly, we consider that investors’ enthusiasm for supporting more innovative companies in fast growing sectors may continue to deliver outperformance.

We should emphasise that companies of this nature will only form a very small component of IHT portfolios, sitting within our ‘satellite’ basket of holdings, which typically represents approximately 20% of the overall portfolio and where individual stock holdings are approximately 2% in size on inception. The average market capitalisation of our AIM IHT portfolio holdings is currently in excess of £700m and we anticipate that this will remain the case.

Positive & sustainable AIM IHT portfolio

From discussions with clients and advisers we see a growing enthusiasm for supporting companies making a positive commitment to society. We agree with this principle and the decision to broaden our investment mandate to include earlier stage, smaller, non-profitable businesses showing positive and sustainable change gives us the flexibility to invest line with these principles.

If you have a client who is looking to mitigate an Inheritance Tax issue but who also has ethical principles to consider then a bespoke positive and sustainable AIM IHT portfolio could help. Please Contact us to discuss further.

You can hear more about AIM and ethical investing from our webinar recordings: ESG & AIM – do they mix? And Positive & sustainable growth in AIM for IHT.

 

The Fundamental AIM IHT Portfolio is a discretionary investment management service where clients can obtain 100% mitigation from Inheritance Tax, benefit from the capital growth afforded by the AIM market and retain control of their assets.

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 17 years, from the link here.


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Fundamental Asset Management introduce positive & sustainable growth into AIM IHT portfolios

Read the What Investment coverage of Fundamental Asset Management’s recent decision to broadening its investment mandate and introduce positive & sustainable growth into its AIM IHT portfolio. (Read the full article here)

Chris Boxall, co-founder & co-managing director at Fundamental Asset has said: “this is an inevitable evolution of our successful AIM for IHT portfolio service. We recognise the opportunity for growth which positive and sustainable early-stage investing presents, while also supporting those businesses executing positive change”.

Rather than avoiding companies which do not meet typical ESG criteria, Fundamental wants to support those businesses executing positive change in their respective industries.

For example, many of AIM’s healthcare related companies have come to fore over the pandemic, whether in the area of testing or drug development. There has also been growing interest in the alternative energy arena, notably the hydrogen economy, as well as environmental matters in general.

The Fundamental’s AIM IHT portfolios have, up to now, avoided earlier stage, smaller, non-profitable companies in these sectors, due to the perceived heightened risk of these types of business for an IHT planning mandate. However, from discussions with clients and advisers they see a growing enthusiasm for supporting companies making a positive commitment to society, despite the majority of such businesses not having yet achieved profitability.

Fundamental Asset will continue to adopt their proven core/satellite approach to portfolio construction, but will increasingly consider investing small elements of the satellite basket in smaller, fast-growing, earlier stage companies.

While there is clearly perceived added risk investing in companies which are potentially in need of further capital injections to commercialise their product or service, the nature of markets has seen these types of ‘new economy’ businesses perform strongly over recent years and attract significant amounts of capital. We consider that investors’ enthusiasm for supporting more innovative companies in fast growing sectors may continue to deliver outperformance.

Enjoy your weekend,

The Fundamental Asset Team

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 17 years, from the link here.

 

Third-party due diligence provider MICAP have recently released their report for the Fundamental Asset AIM IHT portfolio for year 2020/2021. We are pleased to announce that we continue to lead the way on performance with a top quartile position over 1, 3, 5 & 10 years! Read the full report here.


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FTSE main market still struggling to keep pace with AIM!

Against all apparent and previously established logic London’s AIM market for smaller growing companies has comfortably outperformed London’s main market in all key areas during the Covid-19 period so far, one of the worst periods of economic uncertainty and downturn in our economic history.

The AIM All-Share index rose 26% between the end of January 2020 and the end of March 2021, while the FTSE All-Share Index fell -7.8%.

Also, in 2020 AIM saw a -27% fall in the number of companies leaving the market bringing the total to 55. However, the number of companies de-listing on the FTSE All-Share, rose 8% to 53, with some of those joining AIM.

On top of that, money raised by new companies joining the main market fell -19% to £2.5bn, while AIM only saw a decline of -1% from £496m to £489m.

Our associated online investment magazine Investor’s Champion covers all the new arrivals to AIM. April’s new arrivals are covered in the Blog here.

But why such a difference? Well AIM by its nature is a marketplace for many innovative and fast-moving business which are better positioned to adapt quickly. AIM also has a large exposure to some of the economy’s best-performing sectors, such as technology. The main market on the other hand has been pulled down by more established and slow-moving businesses with some in struggling sectors in the pandemic such as oil, banking and housebuilding.

The main market is yet to reach its pre-pandemic level. In contrast, AIM keeps its place as one of the most successful growth markets in the world and continues to prosper and generate enviable returns for investors.

Enjoy your weekend,

The Fundamental Asset Team

 

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 17 years, from the link here. We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and platform partners.

Third-party due diligence provider MICAP have recently released their report for the Fundamental Asset AIM IHT portfolio for year 2020/2021. We’re pleased to announce that we continue to lead the way on performance with a top quartile position over 1, 3, 5 & 10 years!

Read the report here.


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Reasons to consider Small Cap stocks & AIM for IHT

In this podcast, IGTV’s Jeremy Naylor discusses Small Cap investing, including AIM for Inheritance Tax planning, with specialist portfolio manager, Chris Boxall from Fundamental Asset Management.

With a proper strategy, investing in the Small Cap space can be very profitable. Starting with what a Small Cap stock is, the podcast explores how investors should approach this underrated investment area. Chris also discusses the valuable Inheritance Tax benefits available to UK investors through fast-growing Small Caps on London’s AIM market.

Click here or the image above to listen to the podcast.

You can even download the session on Spotify, Apple Music, Google Music and Deezer


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The Spring Budget- what does it mean for Inheritance Tax?

The Chancellor of the Exchequer Rishi Sunak recently delivered his spring Budget setting out the Government’s plans for taxation and spending for the upcoming financial year. This contained several important measures aimed at restoring control of public finances gradually and to tackle the ongoing challenges brought about by the coronavirus pandemic.

But what does it mean for Inheritance Tax?

Business Property Relief

Much of this discussion prior to the budget was focussed around the rules on Business Property Relief. Business Property Relief allows an investor to achieve 100% mitigation from Inheritance Tax on Business Property Relief assets held for two years and until death.

Not every business qualifies for Business Property Relief, but shares in a qualifying company listed on AIM, the growth market of the London Stock Exchange, do. We have been successfully managing AIM Inheritance Tax portfolios since 2004, significantly outperferming the AIM Index.

Mr Sunak made no changes to the rules on Business relief which seems in line with his position to support small businesses. Our report available from the link here and below explains more about Business Property Relief.

Personal Tax Thresholds

One area where Rishi did cover Inheritance Tax was in his decision to freeze all personal tax thresholds until 2026, including Capital Gains Tax, Income Tax, Inheritance Tax and the Pensions allowance.

The Inheritance Tax threshold freeze includes both the nil rate band and the residential nil rate band.

These thresholds were expected to rise with inflation as an individual’s income increases, but as this will no longer be the case, more individuals will find themselves with an Inheritance Tax issue on the horizon as they move towards 2026.

One simple and popular Inheritance Tax planning solution remains an AIM Inheritance Tax (‘IHT’) portfolio which will give full IHT mitigation after only two years while also enabling the investor to retain access to funds. An AIM IHT portfolio can also sit within an ISA.

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here. We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details.

Join us for our webinar at 2pm on 25th March 2021 where we will be discussing Are AIM tax reliefs at risk? You can register from the link here.


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What drove AIM’s outstanding performance in 2020…

London’s AIM market had a remarkable 2020, ending the year with its market value at an all-time high and with the AIM Index also significantly outperforming other UK main market indices. But what drove this remarkable performance in such a challenging year?

AIM (formerly known as the Alternative Investment Market) closed 2020 with 819 companies and a total stock market value of £131 billion. While there was a net decline of 44 companies from 2019, the overall market value was £16.9 billion higher. A lot of the strong performance came from companies qualifying for the popular Inheritance Tax planning reliefs.

The AIM index continues to be dominated by relatively few large companies, with AIM’s twenty largest companies valued at £45 billion, representing 34% of the total value of AIM. At the end of the year there were a record 24 AIM companies valued at more than £1 billion each, compared to only 16 at the end of 2019.

With its shares up 42% in 2020, ASOS closed the year as AIM’s largest company, valued at £4.8 billion, having assumed the crown from online fashion rival Boohoo Group, which came in second, valued at £4.35 billion, despite attracting criticism for poor working conditions at its suppliers and questionable corporate governance.

AIM’s Leisure Goods sector was another beneficiary of the pandemic seeing its value soar £3.7 billion to £7 billion, driven by strong trading from video gaming companies, three of which were valued at more than £1billion each at the year end, with Codemasters Group not far behind.

AIM subsequently lost Codemasters as it was acquired by US giant Electronic Arts. It’s a shame to see another fast-growing UK company acquired by an overseas rival, but this is very much the nature of AIM, with UK shareholders seemingly unwilling to back the longer-term growth opportunity. Codemasters was a constituent of our AIM Inheritance Tax portfolios.

Having attracted little attention for many years, many of AIM’s small healthcare companies were quick to develop tests for Covid-19, subsequently benefiting from explosive demand and share price growth.

The value of AIM’s Healthcare related companies, encompassing the sub-sectors of Medical Equipment and Services and Pharmaceuticals and Biotechnology, rose £5 billion in value to £17 billion.

There were big moves from anything involved in Covid-19 testing and vaccine development, with companies in these areas adding £1.6 billion of market value. The Healthcare sector also brought AIM’s top performer in the year in Novacyt, which received large orders from the UK’s Department of Health for its Covid-19 tests, helping to lift the shares over 6000% in the period.

With many countries (and notably Germany) getting behind hydrogen as an alternative to natural gas, there was growing interest in hydrogen-based energy, which is being pushed as a solution to fill the energy gap left from the impending closure of nuclear and coal-fired power stations.

AIM has several hydrogen fuel cell companies, whose shares soared over the course of the year, despite the challenges of the pandemic, adding £5.9 billion in market value to the Alternative Energy sector. Both ITM Power and Ceres Power closed the year valued at more than £2 billion each, with shares of the former up 600%.

AIM’s Technology sector consisting of 113 companies, encompassing the sub sectors of Software, Hardware and Telecommunications related activities, proved extremely resilient with its value rising £4 billion to £18 billion.

Our associates Investor’s Champion provided a review of AIM’s electrifying performance in 2020 in this update here.

AIM’s outperformance relative to the main UK market was driven by the latter having no exposure to video gaming and hydrogen fuel cells, two sectors seeing exceptional share price gains, and relatively little pure exposure to niche software, technology and online retail. The UK main market also continues to suffer from a distinct lack of growth!

The AIM of today consists of a far greater number of good quality businesses, many of which are delivering far more impressive growth than their peers on the main market and are also suitable for AIM Inheritance Tax portfolios.

As individuals own 25.1% of AIM companies, against just 11.3% of FTSE 100 companies, UK private investors will also have benefited very nicely from this outperformance and supported many fast growing UK businesses.

To benefit from the Inheritance Tax planning reliefs, individuals need to own the qualifying AIM shares directly in a segregated portfolio in their own name i.e. the tax benefit cannot be gained through investing via a collective/fund structure. In support of this, a growing number of financial advisors embrace AIM and AIM Inheritance Tax portfolios, which can also be accessed through a number of advisor wrap platforms.

We discuss AIM’s impressive performance in 2020 and potential themes to follow in 2021 in our Webinar here.  

Click the picture below to register for the session.

 You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here.

We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details.


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How does AIM Contribute to the UK Economy?

In 2019, AIM companies contributed £33.5 billion to UK GDP, directly supporting more than 430,000 jobs and contributing £3.2 billion in tax revenue. Over the last 5 years the direct economic contribution made by AIM companies has grown by 35% from £24.8 billion while employment has grown by 22%.

In addition to this, direct contribution from AIM companies support further economic activity through both their supply chains and the expenditure of employees in their local economies. Through their supply chain expenditure AIM companies support a further 294,000 jobs and £20.3 billion of GVA. This indirect impact includes a broad range of suppliers to AIM companies such as financial services (nominated advisers and stock-brokers), business services (registrars, financial public relations, legal, tax, accounting and audit) as well as wider goods and services.

Both those employed directly by AIM companies as well as those employees supported through the supply chain will spend their wages on goods and services supplied by UK businesses. These induced effects generate further employment and GVA. The induced impact is estimated to support a further 181,000 jobs and a £13.4 billion GVA contribution to GDP.

Taken together, the overall economic impact is equivalent to £67.2 billion in GVA and over 900,000 jobs.

Improving productivity

AIM companies are, on average, more productive than the national average with productivity of £77,700 GVA per employee compared to £56,387. This is only marginally below the London average of £79,586 – the most productive region in the UK. Over the last 5 years, the productivity of AIM companies has improved by 11% compared to 10% nationally and 9% in London.

Regional spread

Unlike most businesses on the main market, AIM businesses are spread regionally across the UK in terms of their location, workforce and production lines. This helps support the UK government’s strategic goal of improving productivity and prosperity across all regions of the UK and helping balance regional disparities. Regional benefits are clear across areas where productivity is lower such as in the Midlands, Yorkshire and the North East.

Encouraging exports

Exporting plays a vital role to the UK economy by raising additional revenue from overseas. Around 20% of the turnover of UK-incorporated AIM companies comes from overseas, twice as much as their private company comparators. This figure grew significantly from £7 billion in 2010 to £12.4 billion in 2019.

Supporting growth

AIM plays a key role in supporting growth in small and medium sized businesses by allowing them to raise external finance at different stages in their lifecycle. This enables them to raise equity capital supporting their innovation, driving productivity and creating employment. It is this access to appropriate financing options that allows a business to scale and reach their growth potential.

AIM has made a significant contribution to the UK economy and has a critical part to play in supporting the economic recovery and helping to support growth across the UK economy.

(Research Grant Thornton- June 2020)

Join us for our webinar at 2pm on 25th February 2021 where we will be discussing just how valuable AIM is to the UK economy and the opportunities in 2021.

You can register from the link here.

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 16 years, from the link here. We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details.