According to a survey conducted by Ingenious last year* the single most important factor that motivates financial planners and wealth managers to recommend a Business Relief (BR) qualifying service to clients is the speed of IHT efficacy. BR investments should be fully IHT-exempt after just 2 years, rather than the 7 years of a Potentially Exempt Transfer (PET).
This feature makes BR-based investments attractive to clients looking for proactive estate planning solutions that allow them to retain both access and control of those assets, and even more so for those clients who may be concerned about their longevity. As clients frequently make estate planning decisions in later life, it is also likely that more clients will live for two years following an investment decision than for seven.
These drivers have led BR-based investment services to such popularity that now well over £1.5Bn per annum is invested into these solutions**. As a result, a wide variety of fund managers’ services have proliferated to support demand.
However, independent research into these solutions has so far understandably tended to focus on just one of the two major elements of a BR-based service: the underlying investment service and how that may impact a client’s outcome. Due to the common assumption that all BR-based services will produce full IHT efficacy after the same 2-year holding period, the other element, the actual estate planning impact of these services, has been largely ignored.
However, even if a “2-year plan” does have a better chance of success than a “7-year plan”, the 2-year wait may itself still be taking a significant risk with your clients’ outcomes. And should the clients’ die inside that two-year window, their desired outcomes simply aren’t being achieved when their beneficiaries are being hit with a significant IHT bill after their death. And much as we don’t want to face it, we all run the risk of dying within the next two years, regardless of our age or current health status.
So, what can be done to mitigate this clear risk and ensure we deliver on the client’s outcomes as intended?
For the last five years or more there have been some BR-based services that set up a 2-year life insurance policy alongside the investment service to cover the specific risk of the client dying within those first 2 years. If an investor dies, the life policy will typically pay out 40% of the amount invested into the service, neatly covering the IHT liability and making the investment IHT-effective from day one. However, with these services the client must pay extra fees to cover the costs of the insurance. So, whilst this helps negate the financial impact of mortality within the first 2 years, it will compromise the investment return and therefore the final value that will be passed on to the chosen beneficiaries.
This poses a dilemma to advisers and their clients. If they decide to protect themselves from the impact of IHT if they die within 2 years, they will likely compromise the return they can pass to the beneficiaries; but if they don’t pay for the life cover, they run the risk of IHT fundamentally impacting their loved ones. As a result, many decide to take the gamble and not purchase the cover.
By contrast, a BR-based service that includes life insurance as standard at no extra cost to the investor could deliver this immediate IHT efficacy without compromising on cost or investment performance – an obvious choice for investors and advisers alike.
This kind of service has never before been available on the market – until now. IEP Apex, launched in March, combines Ingenious’ proven investment strategies with life insurance at no extra cost to eligible investors. IEP Apex will ensure that in those cases where investors die within the first 2 years and therefore fail to make Business Relief status, their investment will have grown in line with the performance of the Ingenious IEP services and it will settle the IHT liability via the insurance cover, thus preserving the ultimate value of the investment. Equally, those investors who see out the initial 2-year period will be no worse off as they won’t have paid for insurance thereby protecting their investment returns.
For investors and advisers alike, IEP Apex offers a unique and reassuring way of meeting their estate planning goals immediately in one simple service via accelerated day one IHT cover (post share allotment) without having to incur expensive insurance that hits investment returns.
*Based on a webinar with 340 attendees
** TER – June 2021
Business Relief (BR) qualifying investments are very popular with advisers and investors as the investments are free of Inheritance Tax (IHT) liability after two years, much quicker than other estate planning solutions. Whilst this is appealing, an investor still has a two year wait for the investment to become BR-qualifying.
To address this problem, insurance cover has been available in the market for several years as an optional extra to protect against IHT liability during the two year qualifying period. A relatively small proportion of investors take up the option of paying for this protection, but many do not as the cost of the insurance significantly erodes investment returns. These investors prefer to wait the two years out and avoid the cost of insurance cover.
This is an understandable and typical reaction to a discretionary insurance purchase which we often make in our day to day lives if we feel the cost outweighs the risk. However, when the consequences of the event being insured can be significant, and life changing, we tend to think differently and happily put cover in place, such as home insurance. A BR investment is no different. Whilst an investor may not believe they are likely to die in the two year qualifying period, it might happen. Nothing is certain after all, other than death and taxes, the two things under the spotlight here! And, if the investor were to die in this two year qualifying period, the consequences for their beneficiaries would indeed be significant with 40% of their estate reduced via IHT, something which most people would want to avoid happening to their beneficiaries.
That’s why we developed IEP Apex, the only BR-qualifying investment with complimentary insurance cover as standard. IEP Apex gives investors and their beneficiaries peace of mind immediately following share allotment that any IHT arising in the first two years will be settled by the insurance policy, for no extra cost to the investor. No hard decisions, no trade-offs, just peace of mind from day one following share allotment.
Given the potential consequences, why would your clients wait two years for their investment to become BR-qualifying when they don’t have to?
How does it work?
The insurance policy is designed to settle the IHT liability arising in the two years post share allotment if the investor dies within this time. In year three, the investment should qualify for Business Relief as normal so it becomes IHT-exempt. It’s really that simple.
Why should you recommend it to your clients?
IEP Apex is a new type of BR-qualifying service. It is unique in that, to the best of our knowledge, no other BR-qualifying service provides complimentary insurance cover as standard to pay for the IHT liability arising if the investor dies in the first two years post investment. The insurance cover is integrated as part of the investment service. It’s simple and straightforward – there are no examinations or complicated forms, no need to assess by how much the cost of adding insurance will erode performance. Just a simple health declaration as part of the easy application process, and investors’ IHT liabilities are covered in case the worst happens in the first two years post investment.
But that’s not all IEP Apex provides. Beyond peace of mind, IEP Apex offers investors:
The IEP Apex peace of mind
At any stage of life, IEP Apex protects investors and their beneficiaries from the consequences of their estates being reduced by 40% in the two year BR-qualifying period. Why should investors wait two years for their investments to qualify for BR when they can be covered immediately following share allotment?
IEP Apex has your clients covered, just in case.
Two Ingenious-backed films, both comedy-dramas and both based on real-life stories, have been enjoying critical and box office success in recent weeks.
The first, The Duke, starring Jim Broadbent and Helen Mirren, tells the story of Kempton Bunton, a 60 year old self-educated taxi-driver, who in 1961 steals Goya’s portrait of the Duke of Wellington from the National Gallery in London in what might best be described as a philanthropic heist. Set partly in industrial Newcastle upon Tyne and partly in early ‘60s London, the film is already being cited as a comic masterpiece.
Jim Broadbent gives the performance of his life in a movie which, sadly, was the last feature film to be directed by the great Roger Michell, who died in September 2021. It was awarded five stars by The Guardian and the Daily Telegraph at its world premiere at the Venice Film Festival in 2020. The film’s theatrical release was delayed by Covid but has been a great hit with the public since it opened in February.
The second film, Phantom of the Open, directed by Craig Roberts, stars Mark Rylance as Maurice Flitcroft, an amateur golfer, dreamer and unrelenting optimist, who succeeded in gaining entry to the British Open Golf Championship Qualifying Competition in 1976 where he shot the worst round in Open history, infuriating the golfing establishment and becoming a folk hero in the process. Also starring Sally Hawkins and Rhys Ifans, the film is remarkable for Mark Rylance’s perfectly pitched performance as the defiantly hopeful amateur Flitcroft, a role which the actor plays straight to great comic effect.
Phantom was released in March in the UK and, like The Duke, is proving immensely popular. This is a relief for the whole industry. Over the last two years the pandemic has cast a large shadow over the theatrical box-office for film, with cinemas closed for long periods and audiences evidently reluctant to return other than for occasional super-hero Hollywood movies like The Batman and action-thriller blockbusters like the James Bond film No Time to Die.
But the tide is now turning, and it is high quality, quintessentially British films like The Duke and Phantom of the Open that are currently proving instrumental in attracting nervous audiences back to broader cinematic fare. Ingenious is delighted to have worked with long established partners the BFI, BBC Film, Pathe, eOne, Cornerstone, Baby Cow and Screen Yorkshire to bring these two films to the public. Both films will shortly be released in the United States by Sony Pictures Classics.
Ingenious today announces the launch of IEP Apex, a simple and cost-effective solution for any financial advisers and their clients looking to maximise the wealth they pass onto their beneficiaries. IEP Apex is designed to take a holistic approach to estate planning by providing a unique set of benefits as standard, including:
IEP Apex focuses on protecting capital via a lending strategy secured against high-quality assets with a low correlation to public markets. This strategy can reduce volatility in investment returns and aims to benefit from long-term growth ahead of inflation.
IEP Apex makes things simple for financial advisers and their clients by providing complimentary insurance cover from day one to settle any IHT liability arising during the two-year Business Relief-qualifying period as well as providing access to a complimentary care advisory service.
While investment managers have historically always charged investors for insurance cover and peace of mind, Ingenious is proud to make both insurance cover and access to the care service available as standard, creating a new type of estate planning service.
IEP Apex will become the fifth service in the Ingenious Estate Planning family. All IEP services offer investors flexible access to their investment, subject to the terms of the investment agreement, as well as the benefits of the complimentary IEP Care Service. In June 2021, for the second year running, the services were ranked second most competitive in the market for cost over a five-year period, while the Private Real Estate strategy was also ranked number one for the second year running for overall return over a five-year period1.
IEP Apex operates an asset-backed lending strategy to reduce risk and protect investors’ capital while seeking to carefully deliver predictable long-term returns. An investment in IEP Apex can be expected to have a low correlation to public markets, an important consideration for diversification of an investment portfolio.
IEP Apex keeps things simple. Investors achieve immediate peace of mind by no longer having to wait two years for their investment to qualify for Business Relief, or longer with other strategies. If an investor were to die during the two-year qualifying period, their liability to IHT is settled via the insurance cover, providing peace of mind from day one – why should an investor take the risk of waiting two years for Business Relief when they can achieve the same effect immediately, on day one?
From year three onwards, the investment should qualify automatically for Business Relief, meaning that the investor should face no charge to IHT at any point post investment.
Investors automatically receive access to the complimentary IEP Care Service, an advisory service that enables them to plan both practically and financially for potential care needs before they become a reality. This feature also comes as standard as part of this new type of service.
Historically, investment managers have charged investors more money for additional services such as insurance cover and access to care advice. With the new IEP Apex service, financial advisers and their clients no longer need to decide between tax effectiveness or cost as IEP Apex provides complimentary insurance cover and access to complimentary care advice as part of the service.
Ingenious has many years’ experience establishing and monitoring Business Relief-qualifying investments and to date every single investor has benefited from the Business Relief expected. In addition to Ingenious’ ongoing monitoring, all of our IEP services further benefit from an independent annual review to provide comfort that the service remains Business Relief compliant. Just another example of our unique service.
1Tax Efficient Review, June 2021. IEP Private Real Estate has been ranked number 1 for two years running for total returns over a five-year period.
2Tax Efficient Review, June 2021. The IEP services have been ranked number 2 for two years running for total cost over a five-year period.
On 23rd March it was announced that the NFTS Board of Governors had appointed Sophie Turner Laing, former CEO of Endemol Shine and MD of Sky, as its new incoming Chair. She becomes the School’s first female chair, succeeding Ingenious founder Patrick McKenna, who will step down at the end of his final term in August, having held the post since 2013.
The NFTS, which has some 600 students studying a wide variety of industry focused MA courses, Diplomas and Certificates covering the whole screen sector, from film and TV to animation and games, has regularly featured in The Hollywood Reporter’s annual ranking of the world’s top ten film schools. It has been described by The Guardian as the world’s best film school, reflecting the fact that the School’s graduates are invariably snapped up by industry on graduation, demonstrating the unique strength of the School’s distinctive teaching model, which is strongly influenced by commercial partners. These include the BBC, Channel 4, Sky, Disney and Amazon.
Patrick’s leadership of the School has been transformational. It has greatly expanded its educational footprint, with the opening of state-of-the-art equipped premises in Beaconsfield and new teaching facilities in Glasgow (NFTS Scotland), Leeds (NFTS Leeds) and Cardiff (NFTS Wales). The number of students taught has more than doubled, whilst the progressive change in the School’s gender and ethnic balance within the student body has set the standard for improving performance on diversity in recruitment.
Ingenious Real Estate is now focused on supporting more sustainable commercial and residential property schemes in the UK following the latest funding commitment from Shawbrook.
The London-based investment manager, part of the Ingenious Group, is aiming for net-zero developments to account for 25 per cent of its portfolio by December this year and has secured a new £35 million revolving credit facility from Shawbrook Bank to originate sustainable opportunities.
Founded in 2014, Ingenious Real Estate provides debt and equity capital to experienced, mid-market developers in the residential, commercial and mixed-use sectors. To date, its team has provided loans worth £500m and supported the completion of 2,400 units.
The firm recently provided a £19m loan to developer Citu to support the development of the Climate Innovation District (CID) in Leeds city centre – the UK’s first low carbon urban neighbourhood. More than 800 homes will be built in four phases using a timber-framed system designed to reduce carbon emissions at each stage of development.
In Felixstowe, Ingenious Real Estate has agreed a development finance facility of £10.3m over 18 months with existing client Generator Group, to fund the development of 21 three and four bedroomed family homes and 10 one and two bedroomed flats. This latest agreement represents a loan to gross development value (LTGDV) of 70%, linking in with earlier phases of an existing and proven project.
In Gateshead, Ingenious Real Estate has agreed a development finance deal with The Morton Group Ltd to support the development of 17 family homes. The development features a mix of three, four and five bedroomed properties in Street Gate. The facility of £4.6m has been agreed over 18 months for an LTGDV of 68%.
In Abberley, Ingenious Real Estate has agreed a development finance facility with a regular client, Piper Homes. This is the 4th deal between Ingenious and Piper Homes. The finance facility of £5m over 21 months has an LTGDV of 70%. The Abberley site, in the countryside between Worcester and Tenbury Wells will offer a range of 25 two, three, four and five bedroomed homes, including two bedroomed bungalows with excellent finishes throughout.
Formed in 2013, Ingenious Real Estate focuses on providing senior development and bridging finance to well-designed schemes in locations across the UK that have a proven demand. Typical loan terms are 18-30 months, and the team has since completed more than £590 million worth of transactions. The current portfolio balance is weighted towards residential, with the majority of Ingenious developments qualifying for Help to Buy.
In September 2020, Ingenious became the first alternative lender to become a member of the UK Green Building Council (UKGBC). As part of this membership, Ingenious is actively seeking to engage through training programmes, thought leadership and access to the latest research so that it helps drive sustainable standards within the sector.
In another challenging year, and with another record-breaking number of award entries, Ingenious has secured a spot as one of the finalists in the Best BR Investment Manager – Unlisted category of the 2021 Growth Investor Awards, hosted by Intelligent Partnership. Now in their seventh year, the Growth Investor Awards are a key event in the investment industry calendar. The awards celebrate the companies and individuals who go above and beyond to support the UK’s growing businesses, and in doing so create jobs, boost economic growth and support innovation.
About the award
Sponsored by Exact Libris, The Best BR Investment Manager – Unlisted award is open to leading investment managers specialising in non-Aim-based investments qualifying for Business Property Relief. Ingenious will compete for the award alongside seven other impressive finalists: Blackfinch Investments, Foresight Group, Octopus Investments, Puma Investments, Seneca Partners, TIME Investments & Triple Point.
This year the Growth Investor Awards are being brought back as a live and in-person black-tie awards ceremony at the prestigious London Hilton Park Lane. Taking place on the evening of Thursday November 4, 2021, the awards present an ideal opportunity to catch up with old contacts, make new ones, and acknowledge the ongoing excellence and resilience of the industry at one of the most important moments in its history.
Award submissions will now move to a second round of judging from an independent panel of judges. All scores are collated to determine the winner and runners-up, with all finalists receiving a tailored feedback and benchmarking report offering expert insight about areas for improvement.
For further information, please visit growthinvestorawards.com
We are very pleased that the Court of Appeal reversed the findings of the Upper Tier Tribunal and ruled that our film partnerships were, as we have always contended, trading with a view to profit. In light of this judgment we are considering what further options are open to us in relation to these proceedings.
