The Downing Estate Planning Service (DEPS) provides full IHT relief after two years by investing in and making loans to IHT-qualifying businesses in two sectors: asset-backed and energy. The target return on your investment (after charges) is 4% p.a. over the medium term.
Your capital is at risk and you may not get back the full amount you invested. Investments are long term and high risk. Tax reliefs are subject to change and depend on personal circumstances. Please find further details of the risks here.
What do I need to know before investing?
Where is my money invested?
The money you choose to put into the energy sector will be invested in Bagnall Energy Limited. Your asset-backed investment will go into Pulford Trading Limited. These are specialist companies set up to invest in, and make loans to, businesses that qualify for IHT relief.
We look for businesses that have a talented management team and a trading strategy focused on capital preservation or steady growth. DEPS targets 4% p.a. over the medium term (although this can't be guaranteed).
For energy businesses, we invest in companies that have planning consent or are based on proven technology. For asset-backed businesses, we invest in companies that own tangible assets because if anything goes wrong we should be able to sell these assets to try and recover money for our investors.
We conduct thorough research to really get to know a company and develop a strong business relationship. Currently we can give you immediate access to a £400 million portfolio of over 75 asset-backed and energy businesses (as at 31 March 2019) that offers you a degree of diversification if you invest in Bagnall and Pulford.
What are the risks?
Investments in estate planning services are not suitable for everyone, so we recommend seeking financial advice before investing. As with all investments, there are a number of risks you should be aware of before you invest.
- The value of your DEPS portfolio can go up and down so your capital is at risk.
- IHT tax reliefs are not guaranteed, subject to change, and only apply if you hold your shares for a minimum of two years and at death.
- IHT qualifying companies may lose their status if IHT rules change, which means IHT relief may no longer apply to the money you have invested in that company.
- The past performance of the DEPS portfolio is not a reliable indicator of future results.
- Investing in smaller companies generally carries higher risk because their shares are less liquid and harder to sell than those in blue chip companies on a main stock exchange.
Please note this is only a brief overview of the risks involved with investing in DEPS. Please read full details of all the risks here before investing.
How is my investment protected?
- Downside Protection Cover: Included as standard and if you're less than 90 years old, this policy is designed to reduce the impact of any loss during a minimum of the first two years before your investment qualifies for IHT relief. It covers a loss in the value of up to 20% of your initial net investment - with no medical questionnaires or exclusions for pre-existing conditions and at no extra cost. The policy is renewable (by the insurer) each year although we can't guarantee it will remain in place after the first two years.
- Life Cover: This is optional at an additional fee and is available to investors under the age of 85 at the date shares are acquired. It covers 40% of your original gross investment upon death within two years. After the initial two years, investors will migrate to the Downside Protection Cover but this can't be guaranteed. Please note, this policy is subject to conditions and if they are not met the policy will not pay out.
The maximum benefit is £100,000 per investor (equivalent to an approximate investment of £500,000).
What are the charges?
Most of the fees and costs are payable by the IHT Companies and underlying businesses, and not out of your portfolio directly. They will reduce the returns generated by the IHT Companies and therefore the value of the shares held in your portfolio.
Initial charge 2.0% payable by the IHT companies Annual Management Charge: Standard 0.5% p.a. of net assets of IHT companies. This reduces to 0% p.a. if performance is less than 4.0% p.a. on a company by company basis Annual Management Charge: Life Cover only 2.0% p.a. of original gross investment. This reduces to 1.5% p.a. of gross investment if performance is less than 4.0% p.a. This only applies if you choose to build in the Life Cover option and it's only for the first two years. After that it will revert to the standard annual management charge Service charge 1.5% of net assets of the IHT companies Performance fee 20% of the excess (including VAT) above 4.0% p.a. compound
Note, VAT will be charged where applicable.
What happens once I've invested?
Once you have invested in the Downing Estate Planning Service we'll send you a letter confirming that we've received your application and allotted your shares. Share allotments happen twice a month.
Provided you give us 10 business days' notice, you can access your portfolio twice a month with no charges or penalties.
If you elect to receive regular distributions on a quarterly, half-yearly or annual basis, these will be paid by a sale of shares from your portfolio. Alternatively, you can elect for any returns generated to remain in the service to enable capital growth.
Note, all distributions are subject to liquidity and Downing’s discretion.
We will provide you with quarterly valuation statements and factsheets to let you know how your investment is doing.