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Why is it important to ask how much cash your client has in their business?

Why is it important to ask how much cash your client has in their business?

At Deepbridge, we recently conducted a survey of financial advisers, and whilst over 90% of responses confirmed that they had company directors and shareholders amongst their clients, over a third didn’t know the cash position of those clients’ companies.*

Given the potentially significant impact this cash position could have on their client’s estate and IHT liability, this could represent a potential future issue that is not receiving appropriate planning.

Deepbridge Protect has been designed for companies holding surplus cash which could mean that their business may be deemed an excepted asset for IHT purposes. The impact of holding surplus cash could be that the value of the entire company could be subject to inheritance tax – meaning the beneficiaries of your company director clients could be facing a significant IHT bill if you don’t help them counter this risk. 

Not only could this be important for the beneficiaries, but for any co-directors they could face significant impacts if the deceased's shareholding is required to be sold to pay inheritance tax, and the constitution or ownership of their company changes.

If you have clients who are directors and shareholders in private companies then this scenario should be an important consideration in succession planning, and therefore Deepbridge Protect could be an extremely useful planning tool.

Explore our Deepbridge Protect solution here.

Why should YOU have the conversation with clients?

  • Your clients could be sitting on an IHT ‘ticking timebomb.’
  • You can assist clients solve a problem they might not even know they have.
  • You can unlock significant new sources of capital to manage on behalf of your clients.
  • This is an issue facing accountants and lawyers all the time, so an opportunity for you to expand relationships.
  • Protect your future business with sound intergenerational planning.

Why is it important to your clients?

  • Protect them from an avoidable IHT liability.
  • Protect their company, co-directors, and employees from a fire sale of assets if your client dies (if your clients’ shareholding in a company unnecessarily attracts IHT, then the beneficiaries may have to sell that shareholding quickly to pay HMRC).
  • Enable them to earn an attractive return on surplus company cash.
  • Allow them access to this capital, if required, whilst shielded from IHT.
  • Invest their money to support local communities in the biggest social housing crisis since the Second World War.

About Deepbridge Protect

Deepbridge Protect is an IHT mitigation service that seeks to help trading businesses obtain full IHT relief, through their membership of a trading Partnership that provides secured lending to social housing developers, which is deemed a qualifying trade eligible for Business Relief.

Potential investors are offered the opportunity to become a Member of a Limited Liability Partnership (the ‘LLP’), a trading partnership resident in the UK that offers corporate entities the opportunity to provide essential short-term secured lending to social housing developers.

UK trading corporate entities may benefit from 100% Business Property Relief (BPR), which removes the investment from their Estate for Inheritance Tax purposes after a holding period of two years.

The Applicant will retain direct control of its Investment in the Partnership, with full control over its participation.

Why should your clients invest?

  • Bridging finance to social housing developers, alongside sector experts.
  • Risk mitigation model;
    • Short term loans of 3, 6, 9 or max 12 months for liquidity purposes.
    • Lending at a maximum 70% loan to value.
    • Full title ofsecurity ownership on the delinquency of the borrower.
    • Upfront monthly interest payments on loans (minimum of 0.9% per month).
  • Objective of long-term capital growth.

Why Social Housing?

Deepbridge Protect’s underlying trading Partnership aims to provide an attractive return to its Members through the provision of lending to corporate social housing developers, whilst retaining full control of their investment, coupled with short-term liquidity. With UK Government policy seeking to increase the volume and quality of social housing across the country, property developers and social housing providers are increasing their focus on housing provision but require third-party funding to do so. The trading Partnership works with sector experts to provide this development capital, with a focus on preserving capital and mitigating lending risks where possible.

Providing development capital to social housing providers enables these organisations to expedite the development of an important housing segment, which can contribute up to 20% of new house builds each year. (HM Government, 30 June 2020). This enables relevant housing associations and local authorities to quickly and efficiently reach a developmental stage at which more traditional longer-term financing can be secured. Since 2020, developers no longer require a normal planning application to demolish and rebuild vacant and redundant buildings, in England and Wales, if they are rebuilt as homes.

If you are interested in finding out more about how Deepbridge Protect can assist your clients, please contact us here.

*Deepbridge Capital survey of financial advisers, carried out in February 2024, with 30 responses.