Inheritance Tax Service

Open for new investment

An asset backed investment for investors looking to pass on their wealth without inheritance tax

Asset backed

Targets 4% p.a. income or growth*

*returns and growth not guaranteed

Discretionary Service

What is the Seneca Inheritance Tax Service?

It is a discretionary service managed by Seneca Partners Ltd. The money you invest will be used to buy shares on your behalf in one or more private investee companies. These shares should qualify for Business Relief, once you have held them for 2 years meaning that no inheritance tax should be due on their value. Importantly, you can access your capital by giving 3 months’ notice.

What are the aims of the Service?

How will my money be used?

Money invested in the service is used to fund secured commercial lending to hundreds of UK counterparties. Lending is deemed a qualifying trade for Business Relief purposes, meaning that the shares an investor holds in the lending companies should be free from inheritance tax. There are three types of lending we undertake:

Social housing

This funding is used to purchase good quality residential housing, typically used by local authorities and similar government bodies to provide accommodation to a variety of vulnerable individuals or those with care requirements.

Commercial property

This funding has been used to fund a portfolio of serviced office buildings, an out-of-town retail superstore and a household name supermarket. The serviced office buildings have traded particularly well since the start of the pandemic, reflecting an increase in demand for the type of flexible workspace provided by these serviced office assets.

Other asset based lending

This funding comprises stock, vehicle and receivable loans to hundreds of counter-parties sitting below the headline exposure to each asset class, which increases diversification and reduces concentration risk.

Risks to consider

You may lose money

Loans made by the investee companies may not be repaid in full or at all, resulting in losses that affect the value of your investment. When your shares are sold, the Net Asset Value of the investee companies may be lower than it was at the time you invested or the price achieved may not represent the full Net Asset Value of those shares.

Target returns are not guaranteed

If you have invested for growth, the amount of any future growth in the value of your investment is not guaranteed. If you have invested for income, the amount of any future dividends is not guaranteed.

It may take longer to withdraw your money

Your investment will be used to buy shares in one or more unquoted companies. There is no market in which these shares can be traded and therefore they can be more difficult to sell. Withdrawal requests are facilitated by the disposal of shares held and are therefore conditional on either someone being willing to buy the shares or cash being available in the relevant investee companies to redeem them.

Growth strategy

What type of loans have been made?

The underlying asset classes providing the security for the growth strategy are currently as above.

Please note that the companies in which the Seneca IHT Service invests and the composition of their loan books may change over time, particularly as loans are repaid and new loans are made.

Figures shown are correct as at 31 December 2021.

How has the growth strategy performed?

The following graph shows the NAV per share for investors in the growth strategy as at 30th September for each of the last five years. Over that period, the share price has increased by c. 20%.

Since the Service was launched in April 2014, every investor who invested for growth and has held their shares for at least 2 years has seen their investment grow.

Figures shown are correct as at October 2021.

Performance shown encompasses the whole period in which the fund has been active. Past performance is not a guide to future returns. Your capital is at risk, you may get back less than you invest.

Income strategy

What type of loans have been made?

The underlying asset classes providing the security for the income strategy are currently as above.

Please note that the companies in which the Seneca IHT Service invests and the composition of their loan books may change over time, particularly as loans are repaid and new loans are made.

Figures shown are correct as at 31 December 2021.

How has the income strategy performed?

Since its launch in October 2017, the target income has been paid in full and on time to every investor. In addition, investors have seen the value of their capital maintained throughout.

Figures shown are correct as at January 2022.

Performance shown encompasses the whole period in which the fund has been active. Past performance is not a guide to future returns. Your capital is at risk, you may get back less than you invest.

Fees & charges

Initial fee

2% (advised) or 3% (non-advised)

Administration fee (only charged for your first investment into the service)

£35

Share purchase fee

0.2%

Annual management charge (paid by investors)

0%

Performance fee

0%

Withdrawal fee**

1%

Bank payment fee**

£7 (for payments up to £250,000), £25 (for payments above £250,000)

Share sale fee

0.2%

All fees subject to VAT.

** Withdrawal and Bank Payment Fees are not charged on any dividends payments made to you. In addition, the Withdrawal Fee is not charged is the withdrawal is as a result of the death of the investor.

For a detailed overview of all charges please download the Information Memorandum.

Important information

Target returns are not guaranteed. Past performance in not a guide to future returns. Your capital is at risk and you may get back less than you invest. Tax treatment depends on individual circumstances and can be subject to change, if in doubt seek advice from your tax adviser.

How can I invest?

We recommend that you seek independent financial advice before you invest. Please make sure that you have fully read and understood the Information Memorandum and Terms and Conditions applicable to the IHT Service. Please also read our Custodian’s Terms of Business. To make your investment into the Service, please complete and return the appropriate Application Form to our Custodian (full details are included in the application form).

Further information

Inheritance Tax (IHT) is charged on the value of the items and money you leave to your beneficiaries when you die. Some of your assets are free from this tax (see below) but those that are not will be taxed at 40%.

 

Anything left to your spouse should be exempt from Inheritance Tax. For other beneficiaries, the first £325,000 of your assets are free from this tax: this is known as the ‘individual nil rate band’. In addition, there may be a further ‘residence nil rate band’ which can apply to the value of a family home in certain circumstances.

In addition to these ‘nil rate bands’, there are a number of ways to reduce your family’s exposure to IHT, such as insurance policies, gifts and trusts. These have varying degrees of cost and complexity and each take different lengths of time to become effective. However, these methods can involve the loss of control or access to your assets (potentially permanently).

Business Relief (formerly known as Business Property Relief) was introduced in 1976, as a way of encouraging investment into unquoted trading businesses and to prevent them being broken up in order to pay Inheritance Tax.

 

If you leave shares that qualify for Business Relief to your beneficiaries and have owned them for at least two years at the time of your death, no Inheritance Tax should be due on the value of those shares.

 

There are a number of IHT mitigation solutions in the marketplace that look to use Business Relief as a way of getting money outside of someone’s estate. These often involve the purchase of shares in companies that are quoted on the Alternative Investment Market (‘AIM’) or private companies.

IHT planning should involve simply more than avoiding IHT. Whilst a 40% tax saving is not to be overlooked, there is no reason why funds should not be working now and providing benefits during your lifetime. For example, leaving your capital intact but taking a regular income from it through retirement can help you and your family members to enjoy the benefits together. Whether it’s paying school fees, enjoying family holidays or even providing for long term care, the money you intend to leave for your beneficiaries can still be enjoyed, all under your control.

 

It is important to know what inherent risks are being taken with your capital in order to achieve a 40% IHT saving. It is also important to understand the volatility levels that you will see in any investment you make.

 

Market dynamics can be volatile and unpredictable. Fundamentally, we are all dealing in a different and much riskier investment environment to the one we thought we knew pre-COVID.

 

Whilst you may accept some exposure to the volatility of AIM share prices, you may also prefer   private company IHT solutions that invest in social housing backed by the security of bricks and mortar, infrastructure or leasing equipment to the NHS . A private company solution is generally less likely to suffer the day to day market volatility you might see with an AIM company solution.

The company (or companies) in which your money would be invested provide secured commercial loans to UK businesses. Each loan is secured against the borrowers’ assets which may include property, receivables, plant and machinery, stock and/or vehicles.

 

One such example is Social Housing. This has become a government cornerstone objective in recent months, more so as a defence against the urban spread of coronavirus. Investment into our IHT Service helps fund our senior secured financing of residential housing stock which, working with our specialist FTSE counterparties over the last few years, neatly provides a socially responsible solution for the UK government in return for government funded rents paid into our IHT Service.

 

The demand for this type of housing stock is growing rapidly, especially in the regions of the UK where Seneca has its footprint. Your money is secured on physical assets backed by government rental. This goes a fair way to answering the safety of capital question which is an uppermost consideration for investors and also provides natural income or growth.

 

If you invest for growth, any profits made on the loans are retained in the business helping to increase the value of your investment. If you invest for income, any profits are used to pay quarterly dividends.

We have designed our IHT Service to appeal to investors who are looking to reduce the amount of Inheritance Tax that will be paid on their estate. They will have experience of investing in tax advantaged investments (eg. EIS, VCT) or buying shares in FTSE 100, FTSE 250, smaller quoted (e.g. FTSE 350), AIM quoted or unquoted companies.

 

Those investors will understand what factors drive the movement of share prices and how in turn that impacts the value of the product. They will also understand and accept the risks associated with making an investment in the Service (see pages 18 to 19). Their current financial situation will mean that they do not need access to the amount they invest for at least three years or need a guaranteed income from it. They should also be able to withstand the loss of some or all of the amount they invest.

 

You should not invest in this Service if you lack the requisite knowledge and experience, are looking to invest for less than three years, need your investment to pay a guaranteed income or are risk averse or have a low tolerance to risk.

No. The Service only invests in private limited companies, none of which are listed on any stock market. Each company’s share price is therefore based on its net asset value (“NAV”) and has no correlation with share price movements of quoted companies, such as those that make up the Alternative Investment Market (“AIM”).

The minimum initial investment is £25,000.

We understand that your circumstances might change. For example, you may need to access some or all of your money invested in the Service in order to pay for long term care. As long as you have invested in the Service for at least 12 months, you can give 3 months’ notice to withdraw some or all of your money. A Withdrawal Fee may apply (see page 17 of the Information Memorandum for more details). As the shares you hold will be in one or more private companies that are not quoted on any Stock Market, any withdrawals are subject to sufficient liquidity being available in the Service or the companies in which you are invested.

If you opt to receive any returns as income, they will be paid as a preference share dividend four times a year, subject to the relevant investee companies having adequate distributable reserves. The payment dates on which this income will be paid are on or around 15th January, 15th April, 15th July and 15th October each year.

 

Please note that income will accrue from the date your shares are allotted (the Allotment Date) rather than the date we receive your subscription.

 

Shares are allotted four times a year:

1st April
1st July
1st October
2nd January

MICAP – August 2021 Read the MICAP review

Important notice

The products and services shown on this website place capital at risk. Investors may receive less in returns than they have invested. Investments may not allow for capital to be withdrawn on demand. If an investment provides tax relief then this relief is subject to change and is dependant on personal circumstances. Any reference to past performance or forecasted performance is not a reliable indicator of future performance.

Seneca Partners recommends that any investor seeks specialised financial and/or tax advice before investing. Seneca Partners does not provide advice and the information on this website, including but not limited to news, should not be construed as such.

Please confirm that you understand this warning and wish to proceed.

Inheritance Tax Service