Deepbridge Inheritance Tax Service
Shares in unquoted trading companies typically qualify for Business Property Relief (BPR), which after two years of being held are free from inheritance tax. Many businesses qualify. Deepbridge’s service invests in renewable energy projects that offer asset backing and a predictable income stream.
- Wind and hydro-electric energy projects
- 6% target return
- Minimum £50,000 investment
Whilst the manager is Sapia Partners LLP, it is the investment adviser, Deepbridge Advisers Ltd that make all the key investing decisions. Ian Warwick set up Deepbridge Capital six years ago. Deepbridge Advisers is a wholly owned subsidiary. Initially Mr Warwick intended to focus on early stage technology, which they do via an EIS portfolio service. However, they got into renewable energy when they were asked to build a wind farm for EIS reasons for an individual wealthy client. This helped launch their renewable energy EIS and IHT offers. Mr Warwick has had a varied career: he was in the Royal Navy, then an oil engineer in Houston and worked for one of the biggest printer companies before settling on technology start-ups in New York. Andrew Hughes is Deepbridge’s head of renewables.
Target return and strategy
The target return is 6% per annum, net of all fees, either paid out as an income or rolled up to produce capital growth.
Investors buy into a BPR qualifying company, Eastern Renewable Energy Limited. As money invested in the service increases, further companies may be launched. Eastern was formed in 2015 and currently has approximately £1.5 million of assets.
Although the IHT service is relatively small, Deepbridge has approximately £43 million invested in renewable energy projects through their existing EIS and bespoke IHT structures.
The focus for investment will be renewable energy generation – specifically hydroelectric and wind projects. Currently their pipeline for new deals is in Northern Ireland, mainly as projects based here still receive subsidies for electricity generated through the Renewable Obligation Certificate (ROC) scheme.
Capital preservation is important, however according to Mr Warwick making money is equally as important. Each underlying project needs to generate about 9% annual return, to achieve 6% in the hands of investors.
Deepbridge’s preference is for construction projects rather than buying existing, already generating renewable energy sites. This is for the simple reason that they believe long term returns will be greater if investing at an earlier stage. Planning consent, grid connection and more technical factors such as wind assessment levels already have to be in place prior to investing in a project,
As this service typically builds projects, during this phase, investments will be valued at cost and subsequently valued using a discounted cash flow methodology once generating electricity.
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.
Construction risk is one of the key issues to consider with this service. Unlike some other renewable energy IHT services, the intention with this is to fund, build and run specific projects for the long term. Keeping a tight control of costs and timings will be crucial to ensure the chance of meeting the annual target.
There is a 5% initial charge and a 2% annual management fee. In addition, there are dealing fees of 0.35% for purchases and sales and an annual custody fee of 0.5%. All fees are paid by the underlying companies. There is no performance fee. Please see the provider's documents for more details on the total fees and charges. Please see the Key Information Document for more details on the fees and charges.
Whilst the IHT service is relatively embryonic, Deepbridge has been building and running renewable energy projects for a number of years. Investing during construction is riskier than buying existing projects, but the returns should be better in the long term, assuming no construction problems.
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.
- Portfolio size
- £17.0 million
- Initial charge
- Saving via Wealth Club
- Net initial charge