The plan reduces or removes IHT liability on the death of the investor through business property relief, but shares must be held for at least two years . The new investments complement the plan’s existing options in UK commercial forestry and UK residential property development y by focusing on income rather than growth.
FITs are Government incentives for individuals and companies to generate their own electricity using renewable energy such as solar power. They provide a fixed payment for each unit of electricity generated for 20 to 25 years, providing a predictable, long-term inflation-protected revenue stream for investors. Stellar believes it is the first to provide investment opportunities in FITs through an IHT mitigation plan.
The other new trade, asset finance for income, is a form of leasing that will provide a monthgly or quarterly income over three to five years. Stellar lends money to smaller businesses who need finance to buy equipment that is crucial to the running of their business. The equipment will not be worth more than £50,000 and the loan will be repaid with interest over a two to three year period. Supporting all loans will be a personal guarantee from the director and shareholders that they will repay what is owed if the business cannot. The personal guarantee includes a charge over the equipment and is enforceable through the courts.
Both new investment options are designed to be low risk but investors can take out an optional insurance policy at an additional cost to provide extra peace of mind.
The addition of trading strategies to generate income could broaden the appeal of this plan as a more flexible alternative to a trust arrangement. Stellar says the default rate for its asset finance trade is low at 2 to 3 per cent because of the crucial nature of the assets and the personal guarantee but any defaults would impact on returns, as could any changes the Government might make to FITs.