The sooner investors commit then the sooner
the 2 year clock starts to tick down in order for
inheritance tax relief to become effective.
Crucially though, because investors
are not relinquishing ownership, as
they would do with Trusts and Lifetime
giving, they have the ability to withdraw
monies at 3 months notice. That is a
key feature in the event of unforeseen
circumstances further down the line and
compares favourably to other potential
strategies where ownership of the assets
passes away and where the process of
unscrambling them becomes arduous
and potentially costly.
How does it compare with other
IHT strategies such as AIM
portfolios, EIS, farms etc?
The issue with AIM portfolios is that
you have to take a view on the value
of these stocks possibly many years
into the future and hope that markets
are not in downturn at the point your
estate crystallises. You would clearly
be subject to the issue of timings. And
what happens if any of your holdings
are upgraded to a full listing and fall
outside the IHT exemption?
Some clients have used our EIS
Portfolio Service for IHT mitigation.
However, the majority use the IHT
benefit of EIS as an added benefit
rather than a strategy in its own right.
Even though our EIS Portfolio Service
invests primarily in larger, more
stable and lower risk companies, EIS
is inherently pure equity investing
and carries more risk than the SITS
Portfolio where there is a wide and
diverse spread of fully secured loans.
We feel therefore that SITS is better
suited as a specific IHT solution where
assets can reside safely for an indefinite
period until required. Farms too have
IHT protection but don’t offer any
liquidity whereas liquidity is a strong
feature of SITS where loans are repaid
and recycled on an ongoing basis
by SSL.
Most of our SITS investors are
attracted by the security, capital
preservation and the predictability
of what it offers to their planning
process.
Is it a costly service?
We don’t think so when you consider
the strength and pedigree of the
Seneca team engaged in running this
service and ultimately that’s what
investors are buying. A substantial
amount of time and resource is deployed
in the due diligence pre investment and
of course, the post investment control
and monitoring of loans.
We charge investors an initial fee
of 2% on the amounts they invest in
SITS. Thereafter, the trading company
is expected to cover its own running
costs including the management time
costs of having the Seneca team engaged.
To that extent, the initial fee is all that
investors would have to pay Seneca;
we even absorb fees for the custodians
who administer SITS! There are no
annual management charges for
investors to pay. There is a provision
for intermediaries to add their own fees
but this is entirely an arrangement
between intermediary and client which
both parties are required to sign into.
Is there a time or availability
limit for investors who are
considering SITS?
No there isn’t. Clearly the sooner
investors commit then the sooner the 2
year clock starts to tick down in order
for the IHT relief to become effective.
Some clients have segmented existing
holdings within their portfolios,
recognising that targeted capital growth
of 4% net and the potential for IHT
mitigation at the same time is an
attractive mix for them.
Other than that, the Nil Rate Band is
fixed until 2019 and so potentially more
‘wealth’ will become exposed to IHT
as asset value ́