In recent weeks, there has been growing noise about the future of Business Relief (BR) and how it applies to certain investment schemes, particularly unquoted Inheritance Tax (IHT) portfolios.
At first glance, BR looks like a useful way to reduce IHT exposure. But when tax rules drive investment decisions, history tells us that the story rarely ends well.
An article from Citywire recently suggested that the Treasury is “looking at levelling unlisted and AIM IHT portfolio relief.”
In plain terms, that means the government may be preparing to reduce or remove IHT relief for some of these schemes, especially those involving unquoted companies, the more opaque and illiquid part of the market.
And that could cause real problems.
Many investors have been encouraged into unquoted BR schemes over the last few years. The sales pitch is simple:
“You can keep access to your money, get tax relief after two years, and support UK businesses.”
But the reality is not so straightforward.
In an AIM BR portfolio, investors can see exactly what they own. The shares are listed, the accounts are public, and prices are determined by the market. You might not like the volatility, but at least it is visible and honest.
Unquoted BR schemes, on the other hand, offer none of this transparency. Investors rarely know what sits inside them. Valuations are decided by the managers themselves, often showing steady increases year after year, even when similar private equity or venture capital funds are marking assets down.
As one fund manager recently commented, some of these schemes seem to “defy economic gravity.”
If the government were to change the rules, for example, removing BR from unquoted schemes, many investors would want their money back.
But the assets underneath are illiquid. They cannot easily be sold.
When investors try to redeem, the managers may be forced to freeze withdrawals, leaving clients trapped.
Sound familiar? We have seen this before, film schemes, mini-bonds, property funds, each born from a good idea that turned into a product factory.
Liquidity risk is often ignored until it matters most.
For estate planning, liquidity matters. Families often need flexibility, not a locked box of untradeable assets whose value exists only on paper.
This is not about whether AIM is “better” than unquoted schemes. It is about transparency, governance, and risk awareness. A truly independent adviser should always ask:
If you can’t answer those questions clearly, you are not investing, you are hoping.
Business Relief was introduced to help genuine trading businesses, not to create a cottage industry of tax wrappers.
The government may well change the rules again. If that happens, some of these unquoted BR schemes could be the next financial scandal in waiting.
Now may be a good time to review where your estate planning strategy is built on incentive, not sense.
Nic Round is a Chartered Financial Planner and Chartered Wealth Manager, authorised and regulated by the Financial Conduct Authority.