Ask the experts
We answer your financial queries
Q: Even with the increase in the tax-free allowance for my residence, there’s a good chance my estate’s going to face an inheritance tax charge. I’ve done the best I can with my pension arrangements – is there anything I can do to shelter the rest of my investments that doesn’t require a trust structure of some kind?
A: There are a limited number of options open to you here, but one that may be worth exploring is the Alternative Investment Market. It has a couple of advantages over other techniques of inheritance tax planning; the assets aren’t ‘locked up’ as they would be in a trust, and you would keep control of them rather than handing them off to a family member. Furthermore, the qualifying period is relatively short – while a gift to a family member might take up to seven years to drop out of your estate completely from an IHT perspective, your investments in AIM could qualify after only two years.
It’s important to be aware of the risks, though. One of the factors we always bear in mind is that part of the reason why AIM can attract Business Relief is because it is an inherently more risky market than the main UK market. Companies can list with fewer constraints and control and less trading history; and they are in some ways less accountable to shareholders than their counterparts on the main market. So, you would need to be prepared for some potentially very volatile performance. It’s unlikely to be a suitable solution if the funds that you would be investing have to be relied upon for other purposes – this isn’t a way to regard, say, your ‘rainy day’ fund.
Another risk is that not all shares on AIM qualify for relief. Certain types of company, such as investment holding companies, don’t qualify; dual listing can also give rise to problems. As with so many of the more unconventional investment solutions, there’s a strong argument for involving an expert advisor before taking the plunge. The article is for information purposes only and should not be interpreted as investment advice.