The funds which specialise in IHT protection by investing in BPR qualifying companies are notoriously secretive about which stocks they invest in. Having reviewed the IHT portfolio of my deceased father, I was underwhelmed by the choice of company made by Octopus.
I am now reviewing my mother's portfolio as I want to invest in BPR qualifying companies and would love to know what high quality stocks I should consider. I'd welcome all suggestions.
Thank you
Francis
The rules around BPR on AIM stocks (and it only applies to stocks listed on AIM) are complex, opaque and subject to change:
https://docs.londonstockexchan...
The whole BPR regime was set up to protect intergenerational transfer of company control, not provide IHT relief for private investors. So bear in mind that the relief could be removed and almost certainly will be by a future government.
High quality AIM stocks that are BPR favourites also tend to be expensive - because the IHT funds tend to hold the stock tightly and many are also family controlled, meaning that the free float is relatively small. So that's another risk.
Finally, HMRC are the final arbiter of whether a stock is BPR qualified - there are complex rules around investment companies, for instance - so you need to keep an eye on changes in business approach. HMRC don't offer any advice on this so the first time you'll know you have a problem is when you (or your beneficiaries) attempt to claim the IHT relief.
Assuming that you still want to do this then there's no alternative to hard work. The easiest thing to do is to pull up the AIM All Share List:
https://www.stockopedia.com/in...
Then work your way down the list by market cap (obviously larger companies will tend to be stronger than smaller ones) looking at the major shareholdings in each. Any that have the big IHT BPR fund providers listed are guaranteed to (currently) qualify for BPR.
The very largest companies on AIM will tend to be dominated by institutional investors rather than IHT funds but once you get a little way down the list they start to appear. So, for instance, Rws Holdings (LON:RWS) is currently the 8th largest stock on AIM and the BPR IHT provider Octopus is one of its major shareholders. The same is true of Keywords Studios (LON:KWS) in 9th place and Gamma Communications (LON:GAMA) in 10th.
You also need to decide whether the company is a good investment at the current price. For example, Keywords Studios (LON:KWS) is a quality company but is very expensive by most measures.
Understandably a lot of people decide this is too tricky and use one of the big fund providers. If you're going to do this yourself I would ignore people like me on bulletin boards and do a lot of research yourself before making investments.
timarr
Thank you so Timarr for your input. Really helpful, that's why I love this Stocko community. Food for thought...
To be fair Octopus generally are one of the better providers in this space, Richard Power is a respected fund manager.
Timarr on the money as always I think another thing to be aware of is do not reinvest any dividends as this is classed as a new purchase and the two year clock on the purchased stock starts ticking again.
Imagine trying to untangle a situation if your reinvesting dividends from say a portfolio of twenty plus stocks over say a ten year period what a nightmare it would be for the Executors/Trustees to try and work out what was bought when and value at the time.
Regards Andy
Hi Francis
I use this website to double check whether stocks have IHT relief if i'm unsure:
https://aimsearch.investorscha...
I think it cost me £100 for 50 searches which I have used over the last few years.
Yes, like you I have been positioning most of my Mothers portfolio to BPR qualifying companies. I believe they all qualify, but you'd be best to check them.
My largest holdings are in
Premier Miton (LON:PMI)
Cenkos Securities (LON:CNKS)
Sanderson (LON:SND)
Rbg Holdings (LON:RBGP)
K3 Capital (LON:K3C)
Polarean Imaging (LON:POLX) largest holding
and I also hold
Open Orphan (LON:ORPH)
Sosandar (LON:SOS)
Character (LON:CCT)
M&c Saatchi (LON:SAA)
Gfinity (LON:GFIN)
Croma Security Solutions (LON:CSSG)
Ethernity Networks (LON:ENET)
Mti Wireless Edge (LON:MWE)
Oxford Biodynamics (LON:OBD)
Pci- Pal (LON:PCIP)
Equals (LON:EQLS)
Shoe Zone (LON:SHOE)
Airea (LON:AIEA)
Fulcrum Utility Services (LON:FCRM)
Supreme (LON:SUP)
Stm (LON:STM)
Arbuthnot Banking (LON:ARBB)
Staffline (LON:STAF)
My main focus is to find companies that will be held potentially for many years and hope a few winners will far outshine the inevitable losers. So for example i'm down on Airea (LON:AIEA) and Staffline (LON:STAF) but hope over time they will be ok.
I have split my picks into stocks that I believe are what I term "Parking" stocks, which I hope will not go down too much, (I have a long list of these on a spreadsheet) but probably won't go up much either over time e.g Arbuthnot Banking (LON:ARBB) and the other list is stocks which have the potential to do very well, but are higher risk e.g Polarean Imaging (LON:POLX)
Hope this helps, i'm not a particularly experienced stock picker but with the help of the SCVR and talk on here have done o.k. The portfolio was well underwater last year, and they all seem to have lifted together, so maybe they are all of a similar ilk, i.e value stocks?
At the moment I am holding off adding any new ones but am always monitoring potentials...i'm saving my fire power for any corrections in the future.
All the best
Chris
Thanks Chris, that's very helpful. Are you saying that all the holdings you mention are BPR qualifying?
I'd be amazed if Premier Miton (LON:PMI) qualified for AIM BPR.
Note that if the business mainly deals in securities, stocks, land, or buildings, or in the making or holding of investments, it will not be eligible for Business Property Relief.
https://www.closebrothersam.co...
Stockopedia has this to say about Premier Miton:
Premier Miton Group plc, formerly Premier Asset Management Group PLC, is a retail asset
management group with a focus on delivering investment outcomes for investors through relevant products and active management across its range of investment strategies, which include multi-asset, equity and absolute return funds.
Some of the others, like Cenkos and Arbuthnot, would need investigating.
timarr
Provided the company is not listed on any other recognised exchange and doesn't mainly deal with securities, stocks or shares, land or buildings, or in making or holding investments, then most AIM shares will qualify. It's relatively simple to make those checks before purchase. Provided you pick a large, diversified portfolio then if the odd one or two subsequently turn out to be ineligible it doesn't really matter.
apart from Cenkos Securities (LON:CNKS) which isn't, and M&c Saatchi (LON:SAA) which according to the site is part qualifying, I think all the rest are, with regard to Premier Miton (LON:PMI) they state :"From publicly available information available to us at the time we last updated this information, our research suggests Premier Miton Group PLC (PMI) is IHT Qualifying.' I take timarrs point thought, and they would need further research. If unsure on a company, you can always ask them!....though for some of them it is a grey area, so you wouldn't know if they were eligible until they were scutinized by HMRC. As DWit199 states below, most AIM shares do qualify after filtering out the eligibility from his list...and if a few slip through then that wouldn't be a big issue for me.
Many thanks DWit99., that's helpful. From what you say, it would seem to be relatively straightforward to do this oneself and stock pick rather then rely on a specialist IHT fund.
...it would seem to be relatively straightforward to do this oneself and stock pick rather then rely on a specialist IHT fund.
That was my conclusion a couple of years ago when I helped set up an AIM portfolio for an elderly relative. I can't promise that I will be proved correct though.
