Risks & Commitments

Inheritance Tax Solutions (ITS)

Inheritance Tax Solutions investments which invest in companies that qualify for Business Property Relief (BPR) are considered to be long term investments designed primarily for investors who understand the higher risks which they may carry and have the capacity to sustain any losses. You should read thoroughly the product brochure and prospectus to ensure that you fully understand these products but ultimately it is your decision, and responsibility, if you chose to proceed.

Past performance is no guide to future performance and there is no guarantee that the investment objective will be achieved. If your regular income withdrawals exceed the level of growth achieved within ITS investments, you will erode your capital value.

Product providers can make no guarantee of the level of capital gains or the income that will be generated by their ITS investments, as this will depend on the underlying performance of the companies they invest in. There is no guarantee that the targeted return per annum will be achieved.

Investments made by the product providers will be placed into one or more unlisted UK smaller companies or into quoted AIM-listed companies. These are considered to be higher risk investments than those made into companies listed on the London Stock Exchange Official List. As a result, there is likely to be limited diversification in the portfolio, which could increase the level of risk you are taking on.

Shares in unlisted or quoted AIM-listed companies are less frequently traded than listed company shares, which makes it harder to predict the time it will take for any sales to be realised.

These investments are only really a consideration for investors with significant investment portfolios or experience who can afford to take a long-term view and are comfortable with the risks of investing in smaller companies. They are therefore not suitable for all investors.

These investments may not be suitable for you, however, as an execution only service, WealthMe will allow you to make your own assessment of your expertise and the suitability of an ITS investment for your circumstances. If you have any doubts you should seek expert advice.

You can sell these type of investments if you needed money quickly. However, there would be the significant possibility of a capital loss, especially in the early years. In addition, if you sell within two years, will no longer qualify for BPR and therefore lose any IHT exemption.

ITS investments invest in some of the most dynamic, entrepreneurial, high growth companies that have different risk profiles. They are aimed at investors who have the capacity for capital loss. This means they are unlikely to be suitable for mainstream investors who may need access to their money in the short term or loss of the investment may cause financial hardship.

Product providers will invest in companies that they reasonably believe qualify for BPR, but they can give no commitment that any such investment will remain a qualifying investment at all times thereafter. The relief is assessed by HMRC on a case-by-case basis at the time of death of the investor, as part of the probate process, and cannot be guaranteed. The proportion of the investment that is deemed to qualify at that time, assuming it has been held for at least two years and is still held at time of death, can be passed to beneficiaries free of IHT. The two-year qualification timeframe commences when your money is invested in qualifying companies. This typically takes place within a week of them receiving your application.

Rates of tax, tax benefits and allowances are based on current legislation and HM Revenue & Customs practice. These may change from time to time and are not guaranteed. In this case, the IHT relief available on these investment may be lost. Changes in law can be made retrospectively.

Key Risks of ITS Investments

  • Deemed by the FCA as a higher risk investment
  • Companies are at an earlier stage of development and will often carry a higher risk of failing than larger quoted companies
  • ITS investments are long-term investments (5-10 years)
  • Early encashment may lead to losses and removal of tax benefits
  • No guarantee of success
  • Speculative in nature
  • These products generally invest in unquoted businesses or quoted AIM-listed companies and are therefore can be volatile in terms of value
  • These products are generally designed to be a medium term investment (circa held for five years) and they may be either difficult to sell in that period or potentially selling early could result in a loss
  • Charges applying to these investments are generally higher than those associated with other financial products 
  • You may not have the right to complain to the Financial Conduct Authority and you may lose the right of access to the Financial Ombudsman Service if you are a self-certified sophisticated individual or a high net worth investor
  • You may have no right to seek compensation from the Financial Services Compensation Scheme
  • Certain rules regarding the form and content of financial promotions will not be applicable. In particular in any financial promotions we communicate or approve which identifies or promotes a specific investment we will not be required to provide you with a comprehensive description of the nature of the investment, the commitment required or the risks involved
  • If you qualify and have signed a certificate either as a self-certified sophisticated individual or a high net worth investor you may subject to promotion of an Unregulated Collective Investment Scheme. The content of this promotion has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. Reliance on this promotion for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested
  • In the event that the company does not comply with the rules throughout the qualifying period, HMRC may not deem the investment to qualify for BPR. At this point you may not have the right to complain to the Financial Conduct Authority and you may lose the right of access to the Financial Ombudsman Service