AIM stocks and Inheritance tax

Reaper

Many AIM stocks qualify for business property relief, which in turn means no IHT if held for just 2 years. So should we be thinking about AIM stocks for IHT planning? My first reaction is no. The first difficultly is not all AIM shares qualify and there is no single list to tell you which ones do. That plus the volatile nature of the AIM market seems to make it unsuitable for a large percentage of your assets.

However I would be interested to know if others think the use of a wealth management company might make it practical despite the additional fees.

Thrugelmir

Certainly worth seeking professional advice for your circumstances. Don't let the tail wag the dog. AIM stocks are less regulated than their premium listing counterparts. 

Alexland

I spent some time considering the Octopus AIM portfolio ISA where they get an external auditor (from memory it was KPMG) to regularly assess the assets for likely business property relief. Diversification across sectors can reduce the risk compared to picking a few AIM shares yourself but the fees are high.
AIM might be an option if you have very high net worth but for us as a couple we can keep the first circa £3m across our estate and pensions lifetime allowances. Looking into AIM just re-enforced the importance of my partner also making high pension contributions to get the money out of our estate.

DireEmblem

Why not set up a family trust, which will hold the assets in perpetuity and pay out a regular income of your choosing?

To be honest I don’t think there should be inheritance tax.  People pay tax on their wages, tax on goods and so on.

I guess it’s a double edged sword.  Our services need funded from somewhere.  If we inherit enough to buy a property, why would we need to work(and pay taxes) so much?

Is there not a rule if you pass on assets 10 years prior to passing, it’s not taxed?

Reaper

DireEmblem said:

Is there not a rule if you pass on assets 10 years prior to passing, it’s not taxed?

Yes, though it's 7 years

Reaper

Alexland said:

I spent some time considering the Octopus AIM portfolio ISA where they get an external auditor (from memory it was KPMG) to regularly assess the assets for likely business property relief. Diversification across sectors can reduce the risk compared to picking a few AIM shares yourself but the fees are high.
AIM might be an option if you have very high net worth but for us as a couple we can keep the first circa £3m across our estate and pensions lifetime allowances. Looking into AIM just re-enforced the importance of my partner also making high pension contributions to get the money out of our estate.

That was one I wondered about. However we probably won't go for it. AIM just seems too volatile to suggest somebody put a significant chunk of their life savings into.

masonic

DireEmblem said:

Why not set up a family trust, which will hold the assets in perpetuity and pay out a regular income of your choosing?

To be honest I don’t think there should be inheritance tax.  People pay tax on their wages, tax on goods and so on.

I guess it’s a double edged sword.  Our services need funded from somewhere.  If we inherit enough to buy a property, why would we need to work(and pay taxes) so much?

Is there not a rule if you pass on assets 10 years prior to passing, it’s not taxed?

I may be unusual, but inheritance tax is the one I dislike the least. I'd happily be subject to a more punishing form of inheritance tax to be released from all the other forms of tax over my lifetime. I don't think the public purse would find that an attractive proposition though.

Gifts are free of IHT if made 7 years prior to passing.

MoJoeGo

Alexland said:

I spent some time considering the Octopus AIM portfolio ISA where they get an external auditor (from memory it was KPMG) to regularly assess the assets for likely business property relief. Diversification across sectors can reduce the risk compared to picking a few AIM shares yourself but the fees are high.
AIM might be an option if you have very high net worth but for us as a couple we can keep the first circa £3m across our estate and pensions lifetime allowances. Looking into AIM just re-enforced the importance of my partner also making high pension contributions to get the money out of our estate.

Yes I think that's the key point and although it might sound a bit glib, £3m is the 'ideal' estate size (as a couple) for simple IHT avoidance, if structured correctly. Ideally I'd be looking to live off of our non-pension investments, as well as using them for gifting to children etc...

Aretnap

masonic said:

DireEmblem said:

Why not set up a family trust, which will hold the assets in perpetuity and pay out a regular income of your choosing?

To be honest I don’t think there should be inheritance tax.  People pay tax on their wages, tax on goods and so on.

I guess it’s a double edged sword.  Our services need funded from somewhere.  If we inherit enough to buy a property, why would we need to work(and pay taxes) so much?

Is there not a rule if you pass on assets 10 years prior to passing, it’s not taxed?

I may be unusual, but inheritance tax is the one I dislike the least. I'd happily be subject to a more punishing form of inheritance tax to be released from all the other forms of tax over my lifetime.

Absolutely. IHT is probably the most harmless of all taxes. Dead people have no need of money. If I could defer every penny of tax that I ever have to pay until the day that I die, I would jump at the chance.

The people who "suffer" as a result of IHT are not the people whose estates pay it, but rather the children of rich people, who get to inherit a slightly smaller large pile of money that they didn't work for.

(As an aside, I notice that it's mostly people from the side of the political spectrum that is normally the most enthusiastic about the idea that people should stand on their own two feet, be self reliant, earn their keep and not sponge off others who are also the most pearl-clutchy about the idea that people who inherit a large wodge of entirely unearned money through an accident of birth might be expected to pay a bit of tax on it.)

As for the argument that it's double taxation, it's just nonsense. Double, triple, quadruple taxation is absolutely the norm. You are taxed on money that you earn. Then you are taxed again when you spend it. Then the company that supplies the goods that you spend it on is taxed on its profits. Then the employees whose salaries your spending pays for are taxed on their own income. And on their own spending. And so on, ad infinitum. Money is not something that is created once, taxed once and spent once. It's something that circulates endlessly and is taxed at each transaction. There's no reason not to treat inheritance (or gifts, for that matter) as yet another form of transaction.

(I say this as someone who expects to both inherit and leave substantial six figure sums, so it's not particularly an argument from jealousy. Not is it a dig at the OP who is perfectly entitled to use allowances to reduce his own tax bill the same as anyone else. Just at the notion that the mere idea of taxing inheritance is somehow abhorrent). 

MoJoeGo

Aretnap said:

masonic said:

DireEmblem said:

Why not set up a family trust, which will hold the assets in perpetuity and pay out a regular income of your choosing?

To be honest I don’t think there should be inheritance tax.  People pay tax on their wages, tax on goods and so on.

I guess it’s a double edged sword.  Our services need funded from somewhere.  If we inherit enough to buy a property, why would we need to work(and pay taxes) so much?

Is there not a rule if you pass on assets 10 years prior to passing, it’s not taxed?

I may be unusual, but inheritance tax is the one I dislike the least. I'd happily be subject to a more punishing form of inheritance tax to be released from all the other forms of tax over my lifetime.

Absolutely. IHT is probably the most harmless of all taxes. Dead people have no need of money. If I could defer every penny of tax that I ever have to pay until the day that I die, I would jump at the chance.

The people who "suffer" as a result of IHT are not the people whose estates pay it, but rather the children of rich people, who get to inherit a slightly smaller large pile of money that they didn't work for.

(As an aside, I notice that it's mostly people from the side of the political spectrum that is normally the most enthusiastic about the idea that people should stand on their own two feet, be self reliant, earn their keep and not sponge off others who are also the most pearl-clutchy about the idea that people who inherit a large wodge of entirely unearned money through an accident of birth might be expected to pay a bit of tax on it.)

As for the argument that it's double taxation, it's just nonsense. Double, triple, quadruple taxation is absolutely the norm. You are taxed on money that you earn. Then you are taxed again when you spend it. Then the company that supplies the goods that you spend it on is taxed on its profits. Then the employees whose salaries your spending pays for are taxed on their own income. And on their own spending. And so on, ad infinitum. Money is not something that is created once, taxed once and spent once. It's something that circulates endlessly and is taxed at each transaction. There's no reason not to treat inheritance (or gifts, for that matter) as yet another form of transaction.

(I say this as someone who expects to both inherit and leave substantial six figure sums, so it's not particularly an argument from jealousy. Not is it a dig at the OP who is perfectly entitled to use allowances to reduce his own tax bill the same as anyone else. Just at the notion that the mere idea of taxing inheritance is somehow abhorrent). 

I suppose another way of looking at IHT is that it's a tax on 'trust' - do I give it all away now to my little darlings and trust them to look after me in my dotage? 

Or do I hang onto it until the last rattle in my throat and only let them have it after tax has been paid (assuming I'm too lazy or incompetent to have taken a few steps to reduce/eliminate IHT).

Either way, HMRC isn't getting a big bite out of whatever I leave behind. 

Thrugelmir

History is littered with stories of family fortunes that are simply wantonly wasted by future generations. Nothing like money to set families at war with either. If you've more than you need gift some to a deserving cause. Not everyone is so fortunate through no fault of their own.