The MAM Blog – Proposed Changes to Inheritance Tax

Jamie McLaren - Financial Planner, Murray Asset Management
Jamie McLaren – Financial Planner

The Office of Tax Simplification (OTS) was tasked to review Inheritance Tax (IHT) by former Chancellor, Philip Hammond, in January 2018. The OTS have now released their second report, ‘Simplifying the design of IHT’, in which eleven recommendations have been made to the Government. This month’s blog post briefly covers the main proposals, which focus on three key areas:

  1. Lifetime gifts

The OTS have proposed replacing the annual gift exemption and marriage/civil partnership gift exemption with an overall personal gifts allowance (although a figure has not been proposed at this stage).

Under current IHT rules, a lifetime gift will remain in an individual’s estate for seven years with a taper applying to a proportion of some gifts after three years. The OTS consider this to be too long a period (which can extend up to fourteen years when a gift into trust has been made) with a complicated taper rule. A shorter period of five years, with the taper being abolished, has been proposed.

  1. Interaction with Capital Gains Tax (CGT)

Currently, there is no CGT payable on death and the individual inheriting assets is treated as acquiring them with a market value as of the date of death. This concept is known as the ‘capital gains uplift’. This allows for certain assets which are exempt or relieved from IHT to be sold shortly after death without any CGT or IHT payable, discouraging people from passing on assets to the next generation during their lifetime.

The OTS have proposed that where a relief, or exemption, from IHT would apply (the classic example being where a spouse inherits), the that CGT uplift be removed with the recipient instead being treated as receiving the assets at the historical base cost of the person who has died.

  1. Businesses and Farms

Trading businesses and farming assets have the potential to qualify for 100% relief from IHT under current rules via business property relief (BPR) and agricultural property relief. BPR can also apply to certain companies traded on the Alternative Investment Market. These exemptions are in place to prevent the break-up of businesses and farms to cover any IHT bill.

The OTS consider these reliefs are generally still appropriate, but that the definitions of the rules should be made clearer due the opaqueness of certain rules e.g. rules impacting non-controlling share in trading companies, LLPs, furnished holiday lets and valuations of assets.

These proposals will likely be considered in Sajid Javid’s Autumn budget.

The full OTS report can be found here.

The MAM Blog – Five Million Pensioners – How Many Scammers?

Charles Robertson - Senior Investment Manager, Murray Asset Management
Charles Robertson – Senior Investment Manager

A recent headline from an FCA press release caught my attention and it was: –

‘5 million pension savers could put their retirement savings at risk to scammers’

Even if it is the life savings of only a small number of pensioners that in the end fall victim to fraudsters, the sum involved could be very significant and the consequences are obviously devastating. The average sum involved in a pension scam is £91,000. Some other numbers for 2018 are worth highlighting: –

• Fraudulent ‘Cold calls’ relating to pensions exceeded £10 million.
• There were approximately 60,000 phone scams relating to HMRC.
• Investment scams cost their victims £197 million.

The fastest growing crime is ‘cybercrime’ and it seems likely that frauds and scams relating to savings and investments are going to become more common and complex. It is worrying that only half of all adults are confident about protecting themselves online. Generally, people are not interested in learning about the practical steps that can be taken in order to reduce the risk of fraud and being scammed and the fraudsters and scammers continue to take advantage of this ignorance.

The FCA through its ScamSmart campaign together with many banks and financial institutions are taking steps to raise awareness and to educate people. The FCA guidance can be found at:-

Click here for FCA guidance

However, the basic advice is: –

• Treat all unexpected calls, emails and text messages with caution. Don’t assume they are genuine, even if the person seems to know some basic information about you.
• Don’t be pressured into acting quickly. A genuine bank or financial services firm will give you time to think.
• Be careful before providing personal information. Scammers will be keen to get their hands on your personal details. Be wary of any emails or calls asking you for this information and, if in doubt, call the company the contact claims to be from. Generally, companies do not ask for personal details and passwords via email. This is particularly applicable to bank details like sort codes and account numbers.

If in any doubt just contact us to discuss your concerns. It is a sad fact that people become very interested in the steps that they could have taken to protect themselves online after the event.

BBC Radio Scotland – Amanda Forsyth on “Good Morning Scotland”


Amanda Forsyth – Investment Manager & Business Development

Amanda Forsyth and BBC Radio Scotland’s Jamie McIvor compare and contrast the ability of Sports Direct and JD Sports to deliver like-for-like growth; outline a wish-list for Superdry’s forthcoming trading; and assess the impact of talks between Galliford Try and Bovis. From 49 minutes into the programme.

BBC Radio Scotland – Amanda Forsyth on “Good Morning Scotland”


Amanda Forsyth – Investment Manager & Business Development

In an outside broadcast from the Edinburgh Festival, Amanda Forsyth and BBC Radio Scotland’s Andrew Black take the temperature of the US economy and its trade relations with Japan; touch on the developing strategy at Pets at Home; discuss the challenges facing Norway’s Wealth Fund in divesting fossil fuel investments; and highlight the industrial relations issues at Ryanair. Andrew also has a go at stand-up comedy. From 51 minutes into the programme.

BBC Radio Scotland – Amanda Forsyth on “Good Morning Scotland”


Amanda Forsyth – Investment Manager & Business Development

Amanda Forsyth and BBC Radio Scotland’s Andrew Black discuss the second-half weighting of blockbuster movies for Cineworld; the proposed name change of Majestic Wine; the impact of Woodford’s woes on Hargreaves Lansdown; and the challenges facing Tulloch’s management team at Aviva. From 51 minutes into the programme.

The MAM Blog – Project Heather: The Relaunch of a Scottish Stock Exchange

Ross Middleton Senior Investment Manager, Murray Asset Management
Ross Middleton – Senior Investment Manager

A Scottish Stock Exchange was originally launched in the 1960’s, lasting 11 years until it was merged with the London Stock Exchange in 1973. However, the re-establishment of a Scottish Stock Exchange has moved a step closer through an initiative known as Project Heather.

Headquartered in St Andrews Square in Edinburgh the plan is also to have offices in Glasgow and Aberdeen. Approximately 45 jobs will be created from the new venture and following an initial investment package announced in March, the founders have also secured a £750,000 grant through Scottish Enterprise.

The new exchange is aiming to focus on those companies wishing to raise capital that are making a measurable and positive social and environmental impact. This will be measured through meeting certain criteria prior to listing and also by achieving ongoing targets. Those leading the project are hoping to use their connections with entrepreneurs and firms within a number of sectors including renewables and construction.

The objective is for the exchange to be complimentary to other existing exchanges with the founders emphasising their plan is to attract new investment rather than encouraging established firms to move their current listing.

The exchange has partnered with Euronext, Euroclear and European Central Counterparty in order to provide leading technology and market infrastructure.

The new initiative will be more cost effective for listing than other stock exchanges and the aim is for the exchange to be launched by the end of 2019.

The MAM Blog – Decline of Government Bond Yields

Stuart Ralph Investment Manager, Murray Asset Management
Stuart Ralph – Investment Manager

From the interest rate lows of 0.25% under Ben Bernanke and Janet Yellen, the benchmark rate of the US Federal Reserve[“the Fed”] began to rise from December 2015 as historically low levels of unemployment and tight labour markets prompted fears that inflation would spike higher. Following President Trump’s appointment of Jerome Powell as Fed Chair, the rhetoric continued to point towards further rate rises, such that by December 2018, the rate had increased to 2.5% – where it currently stands today. In addition to further rate rises, the Fed also signalled its intent to reduce the $4 trillion of Quantitative Easing (QE) debt held on its books, a legacy of the Financial Crisis. In effect, to begin a slow reversal of the stimulative monetary policy put in place following the financial crisis.

While cautionary tales of fighting the Fed are plentiful, the market became increasingly rattled with their intent, citing policy mistake and highlighting associated economic risks. These and other concerns prompted a deterioration of investor confidence and the sharp decline of equity markets over the 4th Quarter 2018. Combined with President Trump’s criticism of its monetary policy, the Fed has since moderated its language and tone. US-Chinese trade tensions, benign wage growth and contained inflationary pressures have allowed the Fed to signal that it will keep rates at 2.5% until 2021 and hint that it may lower the rate if economic conditions deteriorate.

Since the start of the year, yields have steadily fallen, resulting in a lower and flatter yield curve. In the illustration below, we can see that in the past few days, the yield on the 10 year US Treasury Benchmark Bond has fallen markedly below the Fed Funds rate of 2.5%.

A similar dynamic has been played out in the UK, with the UK 10 Year Gilt having fallen below the Bank of England Base Rate of 0.75%

The graphs above indicate renewed concern and suggest that financial markets anticipate a Fed forced to cut interest rates as growth disappoints and inflationary forces fail to materialise. In the UK, the market believes further rate rises unlikely.

There is little doubt that global Central Banks have recently re-appraised economic conditions and tempered plans to reverse the monetary policy of the QE era and there are times the Fed (and others) have been behind the curve, and eventually moved towards the market view. However, there is clearly a risk that markets are putting too much store in a weak US growth scenario, by expecting an aggressive rate cut to 2.0% (a reduction of 0.5% points). In other words, Government Bond Yields may have overshot the mark, particularly given tentative signs of a fragile de-escalation in trade tensions between the US and China.

With the recent reassessment of monetary policy, investors should gain some comfort that Central Banks are positioned to support growth if and when required, and such action should help underpin financial markets over the medium term.

BBC Radio Scotland – Amanda Forsyth on “Good Morning Scotland”


Amanda Forsyth – Investment Manager & Business Development

Amanda Forsyth and BBC Radio Scotland’s Andrew Black discuss the headwinds that caused Lufthansa to warn on profits; examine Ashtead’s role as bellweather for the US construction industry; list some of the ways Kier is seeking to ‘future proof’ its business; and review the impact on Huawei’s sales – and production – of the US government’s sanctions. At 50 minutes into the programme.