Review: Seneca Inheritance Tax Service
Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.
Seneca Vintage is an IHT portfolio targeting a 4% annual return (not guaranteed). It seeks to achieve this by lending money short to medium term to businesses that have some form of asset-backing.
- Asset-backed and secured lending
- 4% annual target (not guaranteed)
- Diverse lending base
- £50,000 minimum investment
Seneca Partners launched in 2010 with founders Ian Currie, Steve Charnock and Richard Manley. The purpose was to invest in small and medium-sized enterprises (SME) and help them grow. All three founders are SME specialists by background. They saw a gap in the market as many SMEs in the north of England couldn’t access capital so they opened six offices across the area to tap into this need. Today Seneca has over £730 million under management across a range of funds, EIS and Inheritance Tax products (as at May 2018).
Target return and strategy
The portfolio aims to return 4% a year and preserve capital. Investors buy into Seneca Secured Lending Ltd (SSL), a BPR-qualifying trading company. SSL provides secured commercial loans in a diverse range of sectors.
There are four potential lending routes: property bridging loans, asset-backed loans, commercial loans, and block discounting. All loans need to be secured against some form of asset. There is a range of short and medium-term loans.
Commercial loans, bridging loans and asset lending form the largest part of the portfolio, with block discounting a smaller percentage. The loans are typically short-term, with a conservative loan to value ratio. SSL would have first charge over the property if the borrower defaults. Block discounting, also known as back-to-back finance, involves lending money to other finance providers (e.g. leasing companies) against a specific parcel of loans.
Seneca’s secured lending team is responsible for the day-to-day sourcing and structuring of potential deals. Deals are then passed to Seneca’s credit committee for approval. Seneca has a seven-stage process for the approval of all new loans.
SSL is valued twice a year on 5 April and 30 September. Withdrawals can be made immediately after the two valuation points, with 90 days’ prior notice.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
IHT portfolios are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
Tax rules can change and benefits depend on circumstances. Eligibility for BPR is assessed at the date of death and will depend on the companies in the portfolio remaining qualifying. Broadly speaking, you will need to have held a BPR qualifying stock for at least two years and still hold it on death to qualify.
Fees and charges
An overall summary of the charges is shown below.
|Full initial charge||5%|
|Wealth Club initial saving||0.5%|
|Net initial charge through Wealth Club||4.5%|
|Annual management charge||1% plus VAT|
|Annual administration fee||£55|
|Exit fee (waived on death)||variable|
See example of the total charges over 5 years
Please see the provider's documents for more details on the total fees and charges. If you would like a full breakdown of charges or a personal illustration, please let us know.
Seneca offers a sensible IHT service focused purely on asset-backed secured lending. The target return isn’t high at 4% and should be within reach. There is already critical mass within the portfolio. There is a strong team with many years’ experience at the helm, backed by a robust process and additional oversight by Seneca’s credit committee.
The Chancellor has requested a review of a range of aspects of IHT to simplify the tax system. The review timescales, its scope and impact are unknown. Currently, investments qualifying for Business Property Relief should be free from IHT after two years. Tax rules can and do change and benefits depend on circumstances.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
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