HOW TO BEAT THE INHERITANCE TAX TRAP

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1 HOW TO BEAT THE INHERITANCE TAX TRAP IN ASSOCIATION WITH

2 Who Is This Guide For? This guide is for sophisticated and high net worth investors. If you re not sure whether you qualify, here s a quick reminder. High Net Worth Individuals include anyone earning 100,000 or more per year or with 250,000 of investible assets that s any assets you own outside of your main home and pension. So, for instance, you could qualify if you had 250,000 worth of share options, or a second home with equity of 250,000 or more. The definition of Sophisticated Investor includes potentially more people. You could qualify if you work in private equity or are a director of a company with an annual turnover of more than 1 million. Interestingly, you could also qualify if you ve been a member of a network of business angels for at least the last six months or have made more than one investment in an unlisted company in the last two years. So, for instance, if you had invested any money no matter how much through platforms such as Crowdcube, Syndicate Room and Funding Circle, you could qualify. IMPORTANT NOTE This guide, like the service Wealth Club Limited offers, is not advice. IHT planning is a complex subject. We have covered some of the main aspects, but cannot cover every nuance. You should not make or refrain from making any decision based solely on the content of this guide. If you are unsure an investment is right for you, please seek professional advice. We have made every attempt to ensure the information in this guide is correct and accurate (18 May 2016) but cannot guarantee it. Please remember, the value of tax benefits depends on individual circumstances. Tax rules can and do change. If you are in any doubt, please seek specialist tax advice. Wealth Club Limited is authorised and regulated by the Financial Conduct Authority. Wealth Club Limited Registered in England No Registered Office 4 Broad Plain, Bristol, BS2 0JP. 2

3 The 'Most Hated' Tax Of All Inheritance Tax (IHT) known as the Death Tax is regularly described as the most unjust and hated of all taxes. After all, if you have already paid tax during your lifetime, why should any wealth you leave behind be taxed again? Perhaps even worse contrary to what many believe you don t have to be super rich to fall prey to it. An estimated 45,100 families will pay IHT in a 35-year high. They will pour a record 4.6 billion into the government s coffers more than 100,000 each on average. Even when the new couples 1 million IHT allowance comes fully into effect, in , 11% of estates are still predicted to be liable. Indeed the government is expected to receive 5.7 billion in IHT payments then a 24% increase compared to So what could you do? Well, there is good news. It is possible and perhaps simpler than many think to legitimately mitigate, even completely eliminate any IHT liabilities your estate may have. Some options you read about here are more defensive, others more proactive. Some more cautious, others high risk. But when the alternative is the depressing certainty of a 40% tax bill, you may find them all worth studying. But before you read any further you will probably welcome a quick reminder of how IHT currently works and how it is changing. The sums involved may be very substantial. So it really merits your close attention. Please remember, though, IHT planning is a complex subject. How it will affect you and which course of action is best will depend on your circumstances. If you are in any doubt, you should seek specialist advice. What IHT is and how it currently works IHT is Inheritance Tax. If your estate exceeds a certain amount when you die currently 325,000 it will attract IMPORTANT: Tax rules mentioned are those currently applying and could change in future. Benefits depend on circumstances 3

4 IHT at a flat rate of 40%. The 325,000 threshold is known as the nil-rate band. Your estate is the total value of all the assets to which you re beneficially entitled (e.g. property, savings, investments, etc.) less any liabilities (e.g. loans, credit cards, mortgage). It s important to note your pension or drawdown plan are not included. They normally sit outside of your estate at death for IHT purposes. So if your net assets are worth more than 325,000 at the time of your death, the excess could be subject to a tax charge of 40%. This decreases to 36% if you leave at least 10% of the net estate to a Registered Charity. It s important to note that married couples or civil partners enjoy a perk. When one dies, the whole or part of their estate can be passed on to the other completely tax free. If all of the assets of one are left to the other, none of the first spouse's or civil partner s nil-rate band is used. So when that partner in turn dies, they can add their deceased spouse s or civil partner s unused nil-rate band allowance to theirs, and potentially pass on up to 650,000 tax free. However, this does not apply if you are an unmarried couple. Below are some numbers for you. The home that you ve worked and saved for belongs to you and your family. We ll help you pass it on to your children ~ David Cameron How is IHT changing and what could you do? In their last election manifesto, the Conservatives pledged to cut IHT for millions of families. When the change was announced in July 2015 it was more complex than newspaper headlines at the time suggested. So it may be wise to understand the new rule, how it could impact you and your estate and what your best course of action may be. From next year a new IHT exemption will be available: the main residence nil-rate band. This is an additional nil-rate band which applies to an individual s interest in a residential property. It will start at 100,000 per person in and increase by 25,000 a year until it reaches 175,000 per person in the tax year. After that it will increase in line with the Consumer Price Index. This means that in a single person could have a total IHT-free allowance of 500,000 ( 325,000 nilrate band, plus 175,000 main residence nil-rate band). This could double to 1 million for married couples and civil partners. Importantly, it is possible to benefit from a deceased spouse's or civil partner s unused main residence nil-rate band even if the death occurred before 6 April Example 1 Single person Total value of all assets 1,250,000 Total liabilities 30,000 = Estate 1,220,000 IHT nil-rate band 325,000 = Chargeable estate 895,000 x IHT 40% = Tax payable 358,000 Example 2 Widow/widower or surviving civil partner Total value of all assets 1,250,000 Total liabilities 30,000 = Estate 1,220,000 Own IHT nil-rate band 325,000 Spouse/civil partner's 325,000 = IHT nil-rate band Chargeable estate 570,000 x IHT 40% = Tax payable 228,000 Example 2 assumes the deceased didn t use any of their allowance, i.e. their whole estate was passed on tax free to their spouse or civil partner on their death. 4

5 But there are a few details of which to be aware. Firstly, the main residence nil-rate allowance only applies to one property which has been at some point your residence, provided you owned it at some point on or after 8 July A property that has never been your residence does not qualify. Secondly, if more than one property was at some point your main residence, you can only use the allowance against one your personal representatives can nominate a property. So if you live in rented accommodation or your wealth is not primarily in your home you cannot benefit. Thirdly, the allowance only applies if you pass a residence, or the proceeds from selling it, to direct descendants : your children (including step-children and adopted children) and their children. So anybody without direct descendants cannot benefit. And lastly, the main residence nil-rate band will be tapered for estates worth more than 2 million. For every 2 your estate is over 2 million (after deducting liabilities but before reliefs and exemptions), the main residence nil-rate band will decrease by 1. That means that at 2,350,000 your main residence nil-rate band will be zero (see examples to the right and chart below). Example 1 Single person with children and/or grandchildren (from ) Total value of all assets (excl. 350,000 + main residence) Main residence 900,000 Total liabilities 30,000 = Estate 1,220,000 IHT nil-rate band 325,000 + Main residence nil-rate band 175,000 = Total IHT free 500,000 Chargeable estate 720,000 x IHT 40% = Tax payable 288,000 Example 2 Widow/widower or surviving civil partner with children and/or grandchildren (from ) Total value of all assets (excl. 350,000 + main residence) Main residence 900,000 Total liabilities 30,000 = Estate 1,220,000 Own IHT nil-rate band 325,000 + Spouse/civil partner's 325,000 + IHT nil-rate band Own main residence nil-rate 175,000 + band Spouse/civil partner's main 175,000 = residence nil-rate band Total IHT free 1,000,000 Chargeable estate 220,000 x Again, these examples assume the deceased didn t use any of their IHT 40% = allowance, i.e. their whole estate was passed on tax free to their spouse Tax payable 88,000 or civil partner. How will the main residence nil-rate band taper work? Main residence nil-rate band Value of estate 5

6 So suppose you find the current and new allowances still leave your estate exposed to IHT. What could you do? There could be numerous options and in most cases it is unlikely that you would choose one rather than another. You will probably find it pays to consider using a combination. Here we explain five of the most common. 6

7 Have You Made A Will? Making a will is the most basic but surprisingly often neglected form of estate planning. It is something most people should definitely consider if they haven t already. The lack of a will can add strain and distress to the surviving family at arguably the worst time. But strain and stress are by no means the only consequences of dying intestate, i.e. without a will. Unless your estate or family set up is very simple, there is no reason not to make a will, and it s important to revise yours regularly and keep it up to date. But what happens if you do die intestate? Well, no matter what your wishes may have been, your estate will be distributed according to set rules. This may mean a larger portion of your estate may go to the taxman. According to a YouGov survey, nearly two thirds of the British adult population do not have a will. If you are married or in a civil partnership and have no children, your estate will go wholly to your surviving spouse or civil partner. The estate will be passed on free from IHT. If you are married or in a civil partnership and do have children, the first 250,000, certain assets (chattels personal property such as clothes, jewellery and furniture) plus half of the remaining estate will go to your surviving spouse or civil partner; the rest to your children and stepchildren and use some or the whole of your nil-rate band. So less of the allowance can pass on to your surviving spouse or civil partner. Moreover your children potentially receive a lower amount overall then they would have if they d only inherited from them. If the part of your estate that goes to children is greater than the 325,000 nil-rate band, IHT will be payable. If you are single, your entire estate minus any IHT payable goes to any surviving family in a set order, the net estate divided equally to the existing class of persons. Children come first, followed by parents, full siblings, half siblings or grandparents. In the absence of each of these in order your estate goes to the Crown. It s important to note that unmarried couples are treated as single. So if one of you dies without a will the other is entitled to nothing. 7

8 Should You Make Gifts? Giving your assets away during your lifetime may be a simple way to cut the potential IHT bill that could arise on your estate on death. as the annual exemption. If you haven t used your annual exemption fully in the previous year, you can combine it with your current year s allowance. Some gifts are always free from IHT (annual and small gift exemption). Others (Potentially Exempt Transfers or PETs) only become completely free from IHT after seven years. So if you die before the seven years are up, and the cumulative value of gifts falling back into charge is in excess of the nilrate band, the value of your estate on death is increased by the value of the gift and your estate suffers additional IHT (see taper relief below). Gifts that are always tax free You can give unlimited amounts tax free to your spouse or civil partner provided you re both domiciled in the UK. Your gift will be immediately outside your estate but of course it will become part of theirs. You have an annual 3,000 tax-free gift allowance, known Tax relief on gifts transferred between three and seven years before death is expected to cost HMRC 35 million in You can also make unlimited tax-free small gifts (up to 250 per recipient each year). However, you cannot use your annual exemption and your small gift exemption for the same person in the same year. In addition, you can give immediately IHT free: Donations to recognised charities, national museums, universities, political parties and some other institutions Any part of your income you regularly give away provided you can demonstrate this does not affect your standard of living Wedding gifts: up to 5,000 to your child; up to 2,500 to your grandchild; up to 2,500 to your spouse or civil partner to be; 1,000 to anyone else Maintenance gifts: to a current or former spouse or civil partner, an infirm dependant or children in education 8

9 Gifts that may be tax free Most gifts you make during your lifetime, except those above, are potentially exempt transfers. This means they are completely IHT free if you survive seven years after the gift. If you die within seven years, the total value of the gifts you ve made in the previous seven years will be included in your estate and use up part or all of the nil-rate band. If the value of those gifts exceeds the nil-rate band, your estate may have to pay IHT at the full rate or at a discounted rate, known as taper relief, depending on when you died. How does taper relief work? Number of years between Proportion of gift and death 40% IHT payable % % % % % 7+ 0 What are the drawbacks? If you like the idea of giving assets or money to your loved ones during your lifetime, using your annual and small gift exemptions might be sensible. It is also simple and straightforward and you can make sure each recipient receives exactly the amount you intend. At first sight there are no drawbacks other than the obvious: you lose control of that asset. So you need to consider how much you can afford to give. You should also consider that for gifts to become completely IHT free you need to live for at least another seven years. Nobody knows when they re going to die; and seven years is a long time. Some might feel giving up their wealth during their lifetime with no certainty this will be effective for estate planning makes gifts less attractive. Another reason why many don t like to give away large sums is concern over what the recipient might do with the gift or what might happen to the gift should the recipient s circumstances change (e.g. divorce or bankruptcy). 9

10 Set Up A Trust? Trusts have been around since the time of the Crusades when lords and knights wanted to keep their castles out of the hands of the taxman or crooked relatives while they were fighting in the Holy Land. At its simplest, a trust is a legal arrangement where the legal and beneficial ownership of an asset are separated. There are different types of trust. Finding the arrangement that can achieve what you want, and ensuring it is drafted appropriately usually requires professional advice. Here we provide just a brief overview of the main types most commonly used for estate planning. Discretionary trusts are a type of trust commonly used to manage assets (money, investments, land or buildings). The trustees (you could be a trustee yourself) make the decisions about how to use the trust income and/or capital but cannot personally benefit from either. Assets put in (settled) into a discretionary trust usually fall outside of the settlor s estate seven years after settlement. So, if you die within seven years of settling assets into a discretionary trust, IHT may still be payable by the estate, similar to the position if you had made a potentially exempt transfer. You don t have to decide at the start who the beneficiaries are and what share they will receive. Indeed, it is usually the trustees responsibility to decide (the settlor can also be a trustee). The flipside of this flexibility is that gifts to a discretionary trust are treated as chargeable lifetime transfers. In general, up to 325,000 the current nil-rate band can be put into a discretionary trust every seven years without incurring an immediate IHT charge. Any excess will incur an immediate IHT charge at 20%, with a further charge of up to 20% if the settlor dies within seven years. Discretionary trusts may also be subject to 10-yearly periodic charges and proportionate exit charges. These charges are complicated and you should seek further technical advice if you believe such a trust would be beneficial. Where a beneficiary is entitled under the trust deed 10

11 to the income from or the use of assets, the trust is an interest in possession trust and the beneficiary is known as the life tenant. The person who receives the trust assets on the death of the life tenant is known as the remainderman. Are there any drawbacks? Trusts are traditionally a staple of estate planning. They can be very effective at reducing the value of your estate and therefore the potential IHT charge. This form of trust may be used in a will where there are a surviving spouse or civil partner and children. The surviving partner (life tenant) is entitled to the income generated by the assets but does not have access to the assets themselves. The assets will however be part of their estate on their death and eventually passed on to the children (remaindermen). Under this arrangement, if, for example, they remarry or enter a new civil partnership, the capital is protected and will eventually be transferred to the children. A Discounted Gift Trust (DGT) is a type of discretionary trust usually set up in connection with an investment (e.g. a bond). The settlor gifts a lump sum into the trust but retains a lifelong 'income' from that money (technically withdrawals of capital). The remainder will be treated like any other gift into a trust. The amount of money raked in by the Treasury from inheitance tax has soared by 70% between 2010 and On the flip side, the relevant tax and general law are complex. In addition, a trust might have similar obligations to those of a company: annual accounts and tax returns may be required and tax may be payable. So the settlor will typically take specialist advice when establishing a trust and the trustees may well take legal, accountancy and investment advice as and when required. Some investors may not like the idea of trusts because of the loss of control. As with gifts, once in a trust, assets are no longer in your control. And, of course, as with some gifts, assets placed in trust will only fall outside of your estate for IHT purposes if you live for at least seven years after establishing the trust. As you will have gathered, the subject of trusts is complex. Moreover any decision you make may be irreversible. So as stated above, it really is sensible to seek professional advice before you go ahead. 11

12 Why Not Invest In Companies Qualifying For Business Property Relief (BPR)? Investing in companies that qualify for Business Property Relief (BPR) is a simpler and more flexible but also more risky alternative to pass more of your wealth to your loved ones. BPR was first introduced in 1976 to allow family businesses to be passed down through generations free of IHT. Its scope subsequently widened and since 1996 made available for a range of assets, including limited companies. We concentrate on the latter, because it has opened up an opportunity for investors. Anyone owning a percentage no matter how small or large of a company that qualifies for BPR can benefit from IHT exemption. This means if you invest in a BPRqualifying company, becoming a shareholder, those shares can be left free from IHT as long as you have owned them for at least two years. No IHT should be payable by your estate on such an investment, no matter how large. The UK and Ireland have the highest death duties of any of the world's major economies. Generally there are no complex legal structures, and unlike life insurance there is no requirement for client underwriting or medical surveys. Moreover unlike the case with making lifetime gifts or settling assets into trust the investment is simply held in your name. So if your circumstances change you could sell down some or all of your investment, though this may take some time and the money you withdraw is not shielded from IHT. However, it s important to remember these are not tax-planning tools, they are investments that offer a tax benefits. That means there is no guarantee the capital you invest will grow. As with all investments, the value can fall as well as rise so you could get back less than you invest potentially you could even lose everything. That said, the combination of speed, simplicity and ability to plan for your estate without giving up ownership of your assets during your lifetime makes this an increasingly 12

13 popular option for some investors happy to accept the risks. Which companies qualify for BPR? Not all companies can qualify for BPR. The company must be a qualifying trading company. This excludes companies that mainly deal with securities, stocks or shares, land or buildings or in the making or holding of investments. It also excludes not for profit organisations and companies that are being sold or are in the process of being wound up (expect in specific circumstances). BPR-qualifying companies can be unquoted or listed on junior stock markets, such as AIM. Though not all unquoted or AIM-listed companies qualify for relief. Provided a company qualifies in full for BPR, an investment in its shares will benefit from 100% IHT relief if you have held them for at least two years and if you hold them when you die. How can you invest in BPR-qualifying companies? One route is to invest directly, by acquiring shares in BPR-qualifying companies. This can be daunting for many investors without the resources or time to find and properly assess the qualifying conditions. Don t forget, when you invest your fortune is linked to that of the company in which you invest. The capital invested is not guaranteed: the value of your investment can rise as well as fall; you could even lose the whole amount you invest. Professional asset managers can help investors navigate this risky area. They put together portfolios selecting from qualifying companies listed on AIM or invest in unquoted companies. In both cases, companies will be selected and monitored to give comfort that they qualify for BPR. In the case of an AIM-listed portfolio, a good investment manager should select the portfolio companies with capital preservation as a priority, conduct research, legal and financial due diligence, risk assessment and ensure rigorous control and monitoring. In the case of an unquoted portfolio, the manager sets up and manages the portfolio companies to ensure they qualify for BPR as well as meet other investment objectives, such as capital preservation. EIS and SEIS investments automatically IHT free after two years Investors who are not exclusively interested in IHT mitigation might consider investments that qualify for the Enterprise Investment Scheme (EIS) or the Seed Enterprise Investment Scheme (SEIS). Such companies are typically not managed with IHT mitigation as a priority, but both types of investment generally qualify for BPR and therefore offer IHT benefits, in addition to income tax relief and capital gains deferral/ relief. EIS investors could currently receive 30% income tax relief and defer unlimited capital gains potentially indefinitely, provided they made the gain up to three years before or one year after the EIS investment. They can also shield their investment from IHT after holding it for two years. SEIS investors could currently receive 50% income tax relief, halve any capital gains tax due and also shield their investment from IHT after two years. Don t forget, though, EIS and SEIS often invest in much smaller companies than IHT portfolios, so the risks can be even greater. In addition by their nature EIS and SEIS are illiquid and the tax benefits depend on the companies retaining their qualifying status. Find out more information about benefits and risks of EIS and SEIS at to help you decide for yourself if these might be worth considering. You could also benefit from a modicum of diversification: AIM portfolios typically invest in companies, whilst unquoted portfolios may have fewer holdings. But please remember neither a professional asset manager nor investing in a portfolio will eliminate the risks inherent with investing in companies listed on a junior market. Once you invest, you will probably expect to own those shares for as long as you live. After two years from the date of the investment, the portfolio can be left free from IHT on your death. If the beneficiaries sold the shares any amount raised would become part of their estate. Should you die before the two years have passed, the portfolio can, as with any assets, be passed on to your spouse or civil partner tax free. If they choose to continue to hold the portfolio, provided the combined holding period between both exceeds two years, the shares can be left free from IHT of the death on the second. 13

14 You can find a selection of portfolios that currently qualify for BPR on the Wealth Club website. Are there any drawbacks? BPR portfolios are investments in shares. In order to qualify for BPR, the company or companies invested in cannot be listed on a main stock exchange. Many of those selected within AIM portfolios are well known businesses, in some cases larger than those listed on the LSE. However, these companies are subject to less stringent checks and regulations compared to a listed business. They can be newer, smaller and more volatile. Inevitably, this carries extra risks. Many portfolios are managed with capital preservation as a priority. This, alongside diversification and due diligence could help but won t remove risks completely. Your investment can still go down as well as up and you may not get back what you invested or even lose your capital. Tax rules can change and the availability of BPR will require portfolio companies to maintain their qualifying status should they lose it, IHT relief would be lost too. You retain control of your assets and can access them if need be. However, AIM and unquoted shares are typically less liquid than those listed on a main stock exchange, so it will normally take longer to liquidate your portfolio. Please also remember if the investment providers were unable to meet their obligations, the Financial Services Compensation Scheme would generally only cover 100% of the first 50,000, so the maximum compensation is 50,000 per person per firm. Lastly, it s important to consider assets invested in BPR can become IHT free after two years but, unlike trusts and gifts, reliefs and exemptions are added back in any calculation of the availability of the new main residence nil-rate band. 14

15 How You Could Leave Your ISAs Free From IHT As at April billion was invested in Stocks & Shares ISA, with 2.7 million investors subscribing 17.8 billion in one year alone ( ). Suppose you were one of those 2.7 million investors. What would happen to this money if you died? Whilst growth and income received within an ISA are tax free during your lifetime, ISAs form part of your estate when you die. Since April 2015 rules are slightly more favourable. When you die, your spouse or civil partner receives a one-off additional allowance for the value of your ISA, so they can make a one-off subscription to their ISA and keep sheltering those assets from income and capital gains tax. On their death, though, the ISA would be part of their estate and potentially subject to IHT. There is a solution. Rules effective from August 2013 allow you to hold AIM shares in your Stocks & Shares ISA. This could be interesting to investors with sizeable ISA assets who want to pass on more of their investments. Why is this? Because companies listed on AIM can qualify for BPR, you could transfer part or the whole of an existing ISA into an ISA portfolio that invests in AIM shares and managed by an asset manager who selects BPR-qualifying companies. To give you an idea of the impact this could have on your IHT liability, let s compare two scenarios: a 100,000 Stocks & Shares ISA portfolio and a 100,000 AIM IHT ISA portfolio. With an AIM IHT ISA an investor could pass on an extra 37,303 IHT free you can see the calculation and assumptions in the table overleaf. An AIM IHT ISA is similar to the IHT portfolios you read about earlier, with very similar benefits and risks. It invests in 20 to 30 companies and often targets growth. Unquoted companies cannot be held within an ISA. You can make new ISA investments each year into such a portfolio, subject to the current ISA allowance ( 15,240) or transfer existing ISAs (unlimited amounts). As your money would still be in the ISA regime, besides shielding your money from IHT, you would also benefit from tax- 15

16 free growth and no further tax on income. Please remember though, an AIM IHT ISA portfolio may be more risky and less diversified than a conventional, well diversified Stocks & Share ISA portfolio. You can find a selection of AIM ISA portfolios on the Wealth Club website. Are there any drawbacks? As with IHT portfolios, the main risk derives from the fact you invest in companies subject to less stringent checks and regulations compared to a listed business. They can be newer, smaller or more volatile. This usually carries extra risks compared to investing in a conventional Stocks & Share ISA. Tax rules can change and the availability of tax relief depends on portfolio companies maintaining their qualifying status should they lose it, IHT relief would be lost too. Please also remember if the investment providers were unable to meet their obligations, the Financial Services Compensation Scheme would generally only cover 100% of the first 50,000, so the maximum compensation is 50,000 per person per firm. Like any ISA, the investment is in your name, so you can access your assets if need be. However, because AIM shares are much less liquid than those listed on the main London Stock Exchange, it will usually take longer to liquidate your portfolio. Stocks & Shares ISA AIM IHT ISA Current investment value 100, ,000 Value after dealing fee (1%) n/a 99,000 Investment value after two years assuming no growth and allowing for ongoing 95,648 94,692 charges (i.e. 1.5% plus VAT annual management charges plus estimated dealing charges) Value lost through 40% IHT 38,259 0 Value of portfolio passed on 57,389 94,692 With an AIM IHT ISA an investor could pass on an extra 37,303 IHT free Source: OCTOPUS INVESTMENTS This table is an illustration of tax treatment only. No investment growth or losses are assumed. In reality, the value of both investments would be subject to market movements and investment/share price movements. It is important to note that the risk profile of each portfolio, and any investment growth or losses, is likely to differ. The estimated annual dealing charges are 0.20%, typical for the Octopus AIM IHT ISA. However, actual dealing charges experienced by an investor may be higher or lower. The example assumes the costs for each portfolio are the same, but actual costs may be different. It does not include any charges paid for financial advice. Also, the current ISA provider may charge a fee for transferring an existing ISA. 16

17 How Wealth Club Helps We hope what you have just read was helpful and relevant. If you think portfolios that benefit from BPR are an attractive option, our service could be helpful. We provide in-depth research on the opportunities available, and explain both benefits and risks in clear English, so you can decide for yourself whether to invest. We review any available performance data, look at fund managers and groups track records and experience. We make a point of meeting or speaking with the fund managers to add depth to our research. As a result, we identify our preferred opportunities those we believe can serve investors better. If you have any questions, you just call us on or us at enquiries@wealthclub.co.uk. You will speak to someone who understands the products and the rules and can clarify any doubts. everything is dealt with correctly in a timely manner. Wealth Club is a relatively new business, but its founders have vast investment experience. Alex Davies, the Chief executive, was a former Hargreaves Lansdown director and shareholder. Ben Yearsley, the Investment Director, a former Head of Research at Charles Stanley Direct, and previously a long-time colleague of Alex s at Hargreaves Lansdown. More importantly both have themselves invested in VCTs, EIS and SEIS for some years. The aim of Wealth Club is simple. To provide high net worth individuals and sophisticated investors with clear, impartial and well researched information on investment opportunities not typically available through mainstream stockbrokers or financial advisers. As a client put it, Seeing a site with an intelligent commentary on the various offerings is a breath of fresh air. If you are a high net worth or sophisticated investor, once you decide you are happy with the benefits and risks and want to invest through us, we help with the application and liaise with the provider with the aim of ensuring 17

18 You ve worked hard to build your estate, take control of who benefits from it. Downing has a range of IHT services, designed to help you find the right solution to help manage your IHT bill. Our services provide: ffcontrol over your investments ffa straightforward solution no gifting or complex trusts needed ffmonthly access to capital in the Downing Estate Planning Service subject to liquidity and 10 days notice ffadditional ISA tax reliefs in the ISA IHT portfolio ffcapital growth and/or distributions in the Downing Estate Planning Service ffinsurance policy covering the first 20% of any net loss on death under age 90, for a minimum of two years from the date the shares are allotted Our investment options Services Investment options Downing Estate Planning Service Asset-backed businesses Renewable energy businesses Downing AIM Estate Planning Service AIM companies Downing AIM ISA Types of investments e.g. nurseries, care homes, pubs, etc. e.g. solar farms, hydro plants e.g. software, retailers, transport About Downing We have specialised for over 20 years in tax-efficient investments including EIS, VCT & IHT qualifying products, proudly supporting the growth of UK businesses. Downing has raised in excess of 1.7 billion from over 35,000 UK investors. To find out more about us, our open products and our track record, visit our website or call us on Risk factors Capital is at risk. Tax reliefs are not guaranteed and are subject to personal circumstances and can change. The availability of tax reliefs depends on investee companies maintaining their qualifying status. IHT relief will not be available if the investor has not held shares for at least two years at the date of death. The value of investments and the income derived from them may go down as well as up and investors may not get back the full amount invested. This is a high level summary of the risks, for more information please refer to the risk warnings and charges contained within the relevant Prospectus or product literature. Important notice This advertisement has been prepared for self-certified sophisticated investors and high net worth individuals and has been approved and issued as a financial promotion under the Financial Services and Markets Act 2000 by Downing LLP. This does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities, or to enter into any investment service, and no reliance should be placed on it. Investors should only subscribe on the basis of the relevant Prospectus or product literature. Downing LLP, Ergon House, Horseferry Road, London SW1P 2AL, is authorised by the Financial Conduct Authority (firm reference number ).

19 What a elief. To pass on your ISA free of inheritance tax, start by talking to the market leaders in tax-efficient investing. 1 When it comes to finding exceptional value in the Alternative Investment Market (AIM), experience can really add up. The Octopus AIM Inheritance Tax ISA is run by one of the most well-established smaller company teams in the market. Together they manage 875 million for over 7,500 investors, delivering long-term performance that speaks for itself: Year to 31 March 2012 Year to 31 March 2013 Year to 31 March 2014 Year to 31 March 2015 Year to 31 March 2016 Inception (June 2005) to 31 March % 12.96% 51.45% 0.95% 22.33% % Please remember past performance is not a reliable indicator of future performance. See below for performance calculation methodology. The table above shows performance for the Octopus AIM Inheritance Tax Service. The Octopus AIM Inheritance Tax Service has been available as an ISA since 2013, and both are discretionary managed in the same way, by the same team. The value of an investment, and any income from it, can fall or rise. You may not get back the full amount you invest. Tax treatment depends on individual circumstances and may change in the future. Tax reliefs depend on the portfolio companies maintaining their qualifying status. The shares of the smaller companies we invest in could fall or rise in value more than shares listed on the main market of the London Stock Exchange. They may also be harder to sell. We do not offer investment or tax advice. We recommend you seek professional advice and read the product brochure before deciding to invest. This is available at octopusinvestments.com. Transfer your ISA in just a few simple steps Before you invest, it s important to understand that investing in AIM-listed companies involves a greater level of risk than standard cash or stocks and shares ISAs. If you are comfortable with the risks, take the first step by visiting the Octopus page at Wealth Club octopusinvestments.com Awarded five stars for customer service, Financial Adviser Service Awards, Largest provider of IHT solutions using BPR in the UK, Tax Efficient Review Performance is calculated by taking the median return of Octopus AIM ITS portfolios each quarter, going back to 30 June 2005, with an appropriate sample of investor portfolios. Only those portfolios that have been invested since 30 June 2005 have been included. If cash is added or withdrawn during a period, then such portfolios have been removed from the calculation. 19 We have then compounded those quarterly total returns which include dividend income, interest, management fees and dealing fees. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No Issued: May CAM

20 By Alex Davies CO-FOUNDER AND CHIEF EXECUTIVE WEALTH CLUB Alex was a board director at FTSE 100 stockbroker Hargreaves Lansdown, where he worked for 15 years. He was responsible for building Hargreaves Lansdown into the UK's largest direct-toconsumer SIPP provider with more than 150,000 clients and over 12 billion under management. After leaving and selling some of his shares, Alex sought tax-efficient ways to invest his money. To his surprise, he found that good-quality services designed to help high net worth and sophisticated investors with non-standard and tax-efficient investments are thin on the ground. This led to the idea of Wealth Club a new service for high net worth and sophisticated investors. The aim is to offer them more compelling and advanced tax-efficient investment opportunities than normally available through mainstream investment platforms and financial advisers. 20

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