RAM Capital and boutique investment manager BMI Finance are promoting Sunstone Outsourcing, an inheritance tax mitigation solution that allows investors to shelter part payments from IHT.
Sunstone buys IT infrastructure and systems that are essential for the running of businesses. It allows its client firms to use the systems through fixed price outsourcing contracts, typically for three to five years.
Sunstone qualifies for business process relief, enabling it can provide 100 per cent IHT relief after two years if the investment is held at the time of death. It will provide investors with a minimum income of 0.25 per cent above the Bank of England base rate and will not take its annual 1 per cent fee if this is not achieved.
Investors can pledge a certain amount to Sunstone but can make part payments and the two year countdown for IHT purposes will start at the time of the first part payment. This feature is unusual and is designed to make tax planning more flexible.
Sunstone’s client firms can be in the public or private sector, but credit insurance will be put in place to cover outsourcing contracts in the private sector. This means that Sunstone will still receive quarterly payments for the contract term from a company which goes into liquidation.
A £16m seed investement has been provided by Octopus Investments and this has been used to secure four IT outsourcing contracts in different sectors. One client firm is a healthcare operator which owns and manages private hospitals in the UK. Sunstone has a five-year contract for systems which provide patient information and maintain clinical data.
A financial services provider, a support services company focused on areas such as rail infrastructure and plant hire, and a provider of career focused distance learning are other client firms. Pipeline deals include a European money transfer business and an amusement park.
IFAs may like this IHT solution as it is not market driven such as Aim and property-based plans. However, some advisers may prefer to monitor it until they feel confident enough with the concept and Sunstone’s ability to secure the diverse pool of outsourcing contracts it is aiming for.