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Information Report

Investor Relations


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INHERITANCE TAX PLANNING THE DEEPBRIDGE GUIDE I N V E S T I N G F O R T H E F U T U R E IMPORTANT INFORMATION This guide provides general information about investments that qualify for business property
INHERITANCE TAX PLANNING THE DEEPBRIDGE GUIDE I N V E S T I N G F O R T H E F U T U R E IMPORTANT INFORMATION This guide provides general information about investments that qualify for business property relief and should not be regarded as investment, financial or taxation advice. Individuals should only invest on the basis of information provided in the respective Deepbridge Information Memorandum and application documentation. Although Deepbridge can transact business directly with clients, Deepbridge always recommends clients consult their own independent financial and tax advisers regarding their particular circumstances. Investments may go down as well as up and investors may not get back the full amount invested. Deepbridge IHT investments are not suitable for everybody so it is important that the risks involved are fully understood before deciding whether a Deepbridge IHT investment is the right option. The information provided does not constitute or form part of an offer, subscription, recommendation for any investment. No undertaking, representation, warranty or other assurance is given, and none should be implied, as to, and no reliance should be placed on, the accuracy, completeness or fairness of the information or opinions contained in this document. Rates of tax, tax benefits and allowances are based on current legislation and HM Revenue & Customs (HMRC) practice. HMRC may change the rules on business property relief at any point. Version 1.1 September WELCOME TO DEEPBRIDGE Deepbridge is a different kind of investment manager. We work closely with our private investors to design innovative products, ranging from direct investment in exciting technology growth companies to asset-backed renewable energy projects, to meet their specific needs. Simultaneously, we also partner with great management teams to help them realise their potential and build successful leading-edge businesses. We operate across four principle divisions: disruptive technology, life sciences, renewable energy and sustainable technologies. Everything we do is underpinned by our extensive knowledge and experience in the divisions in which we operate. We only expose our clients to areas in which we have an exceptionally high degree of expertise. We also promote a culture of professional excellence and integrity, which characterises all that we do. We therefore strongly encourage our investee companies to achieve the highest standards of corporate governance. We bring value to investee companies through our proven experience of building growth businesses, involving our worldclass network of investors, technology advisers, and industry partners. Our key differentiator from other investment managers is that our team and experts are all vastly experienced in building and growing businesses, so when we support an investee company we can offer practical guidance and support which results in better outcomes. Yours faithfully, Ian Warwick Managing Director 3 100% OF INVESTMENT ELIGIBLE FOR TAX RELIEF IHT RELIEF IN JUST 2 YEARS INVESTOR FEE-FREE A DIFFERENT KIND OF INVESTMENT MANAGER 4 IHT THRESHOLD: 325,000 TAXED AT 40% OVER THRESHOLD THRESHOLD FROZEN UNTIL 2018 IHT RELIEF IN JUST 2 YEARS INTRODUCTION Increasing numbers of people are facing the prospect of having their lifetime savings taxed at 40% (over the inheritance tax (IHT) threshold of 325,000) on their death, depriving their family or beneficiaries of this wealth. A majority of inheritance tax planning initiatives, such as gifts and trusts, take seven years before providing inheritance tax relief. For many, seven years is a long time and planning over a shorter period is required. That is why Deepbridge has created the Deepbridge IHT proposition, providing inheritance tax relief in just two years. Through this proposition, the investor maintains control and access to their money whilst potentially also benefitting from capital growth or income generated by the investment. UK property prices rose by 11% in the year to May 2014 alone and are expected to rise by around 25% by 2018*. The inheritance tax threshold has been frozen at 325,000 until 2018, meaning increasing numbers of estates will face a 40% tax when passed on. *Source: Nationwide, June/July ASSETS MUST BE HELD FOR 2 YEARS ASSETS MUST BE HELD ON DEATH 100% RELIEF FROM IHT SHARES CAN BE SOLD AND REINVESTED BUSINESS PROPERTY RELIEF Introduced by the UK government in 1976, business property relief (BPR) is designed to incentivise individuals to invest in UK trading businesses. Business property relief applies to shares listed on junior stock markets, such as the Alternative Investment Market (AIM), or unlisted shares and not all companies qualify. In order to qualify, companies must be trading with the intention of making a profit. For example, businesses which simply hold cash, property or other assets would not qualify for BPR. Through BPR, an appropriate investment can benefit from 100% relief from inheritance tax after death if the investment was held for a minimum of 2 years and was still held on death. Although qualification for BPR is considered by HM Revenue & Customs (HMRC) on a case-by-case basis on death, the Deepbridge IHT proposition only invests in companies which the Deepbridge investment team is confident will benefit from BPR tax rules. If an investor in a Deepbridge IHT investment transfers the investment to a beneficiary of their will before they die, as long as they hold the investment for 2 years prior to the transfer, then this will also attract BPR and benefit from 100% relief from inheritance tax. Deepbridge will assist the executors of a will to ensure the correct process is followed to claim BPR on an estate. Business property relief Applies after initial holding period of 2 years has expired Qualifying shares are deemed outside estate for IHT purposes Assets must be held at date of death or transfer Replacement property Applies where BPR-qualifying shares are sold and then reinvested in BPRqualifying investment within 3 years IHT exemption qualification period is based on both investment periods 6 THE 100% RULE INVESTOR FEE-FREE 100% OF INVESTMENT ELIGIBLE FOR TAX RELIEF GROWTH OPPORTUNITIES BENEFITS OF THE DEEPBRIDGE IHT PROPOSITION The 100% Rule Deepbridge IHT investments are investor fee-free. Therefore, investors are not charged any fees at point of investment. Upfront and ongoing fees are paid by the Investee Companies: this advantage allows investors to enjoy 100% of IHT tax benefits and to have 100% of their investment actually put to work earning investment returns. More accumulated wealth passes to the family Many people have accumulated wealth over the years with the intention that this is passed to their loved ones upon death. However, every year increasing numbers of estates become liable to pay inheritance tax and a BPR qualifying investment proposition could be a useful tool to ensure as much of an estate as possible is passed to the intended beneficiaries. Control With a Deepbridge IHT investment, the investor remains the owner of the asset and can access this investment when they want to. Any income generated by the investment during the investors lifetime is paid to the investor, not in to a trust or to a beneficiary. Speed As long as the investments are held on death, investments in Deepbridge IHT propositions benefit from full relief after just two years. Growth & Income All Deepbridge investments propositions invest in businesses that aim to grow. Underlying investee companies are managed with the objective of producing capital growth for investors over the longer-term or to produce annual income for investors. Simplicity Deepbridge IHT investments do not involve complex legal structures, underwriting or change of ownership purchased shares remain the property of the investor. Experience Although any investment can go down as well as up and investors may not get back the full amount invested. The Deepbridge investment team only invests in sectors where its has experience and takes a hands-on approach to the running of investee companies to ensure they perform as close to expectations as possible. 7 Ms Chester keeps her original portfolio Ms Chester invests in a Deepbridge IHT proposition Gross investment value Value of investment after 2 years, based on an assumption of 4% Inheritance tax payable on death Cash value of investment to beneficiaries 250, , , , , , ,400 REDUCING IHT EXPOSURE A working example is often the easiest way to show how the proposition might work please bear in mind that all individual circumstances are different and Deepbridge advises clients to obtain personal financial advice. Ms Chester lives on her own and her possessions (including her house, savings and investments) are worth 1million. Ms Chester is 80 and wishes to minimise the amount of inheritance tax her family will have to pay from her estate when she dies. Due to her age and deteriorating health, she is concerned that she is unable to make use of traditional IHT planning which will take seven years to reduce the IHT liability. If Ms Chester dos nothing, 40% of all of her assets above the 325,000 inheritance tax threshold will be payable as tax. This will mean her family will have to pay HMRC 270,000 from her estate. Ms Chester has 250,000 in an investment portfolio and discusses with her financial adviser about what to do with this money. After discussing the risks, Ms Chester decides to sell this portfolio and invest in a Deepbridge IHT proposition instead. As Deepbridge doesn t charge investors, all Deepbridge fees are paid by the investee company, Ms Chester knows that the full 250,000 will be free of IHT as long as she holds this investment for just two years (and is still holding the investment when she dies). For the purpose of this example, we will assume that the both Ms Chester s previous portfolio and the Deepbridge investment return 4% per annum. By investing in a Deepbridge IHT investment, Ms Chester could save her beneficiaries 108,160, whilst also having access to the capital if required. This example is for demonstrative purposes only and assumes the inheritance tax threshold of 325,000, which is frozen until The example does not include any fees which may be payable to a financial adviser or authorised third parties. 8 RISKS Your money is at risk As with any investment, the value of shares can go down as well as up and investors may not get back the full amount invested. Investors should be aware that investment in smaller unlisted companies (including business property relief qualifying companies) carries with it a high degree of inherent risk whether or not it is done via a diversified portfolio, regardless of any tax advantages which such an investment might carry and/or regardless of any steps taken to attempt to mitigate that risk. Deepbridge IHT investments should therefore be considered a high risk investment. Long-term investment Deepbridge IHT investments are often held in unlisted companies, which are not as easy to exit from as companies on the open stock market. Deepbridge will always endeavour to meet withdrawal requests as quickly as possible, but there may be occasions when this takes longer than anticipated. Shares must be held for at least two years in order to qualify for business property relief. If shares are sold prior to being held for two years the capital may be reinvested in other business property relief qualifying companies and continue to attract relief. Deepbridge IHT investments should be considered as a medium-term or long-term investment. Tax Rules may change Business property relief is assessed by HMRC on a case-by-case basis. Tax rules may change and companies may not always be BPR-qualifying. If a qualifying company fails to meet the requirements of BPR legislation, tax reliefs may be withdrawn and beneficiaries may be liable to pay inheritance tax. HMRC may change the rules on business property relief at any point. 9 USEFUL NOTES Advice Although Deepbridge can transact business directly with clients, it is always recommended that clients consult their own independent financial and tax advisers regarding their particular circumstances. Experience It is important to understand who is managing your Deepbridge IHT investment on your behalf. Although returns cannot be guaranteed and past performance is not a guarantee to future success, understanding who will be looking after your investment and overseeing the investee companies can provide reassurance that your money is in the most appropriate care. Eligibility Deepbridge works with UK taxpaying individuals who are seeking an attractive, medium-term to long-term investment opportunity and have an IHT liability. Limits Deepbridge only accepts individual investments in excess of 10,000. There are no limits to the amount of business property relief that an individual or estate can claim. Investment structure Deepbridge IHT investments buy shares directly in the investee companies rather than owning units in a managed fund. Death In order for an investment to qualify for business property relief, an investor must still hold their Deepbridge IHT investment when they die and must have held the investment for at least two years. 10 Deepbridge Advisers Limited Herons Way Chester Business Park Chester CH4 9QR Deepbridge Advisers Limited is an appointed representative of Sapia Partners LLP which is authorised and regulated by the Financial Conduct Authority. Deepbridge Advisers Limited is registered in England & Wales, company no Registered Office: 5th Floor, 55 King Street, Manchester M2 4LQ. Deepbridge Advisers Limited is a subsidiary of Deepbridge Capital LLP, a limited liability partnership registered in England & Wales, no. OC
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