Business Relief was originally introduced to prevent viable family businesses from having to be sold to meet Inheritance Tax liabilities on an owner’s death. Nearly 50 years later, it underpins a substantial investment market of its own, with specialist providers offering investments designed to qualify for the relief.
Recent developments involving the Octopus Inheritance Tax Service (OITS), one of the UK’s largest Business Relief investment services, have prompted discussion about the extent to which investors fully appreciate the investment risks that sit behind the tax advantages. While Business Relief products are frequently discussed as estate planning tools, they remain investments in unquoted businesses, with all the commercial risks that entails.
Business Relief can reduce the value of qualifying business assets for Inheritance Tax purposes and has become an increasingly popular option for individuals seeking flexibility in their estate planning. For many investors, the attraction lies in obtaining relief after a relatively short holding period compared with other planning strategies. The growth of the market has also made it possible for investors to access qualifying investments without directly owning or operating a trading business.
The OITS restructuring
The recent restructuring at OITS, prompted by the earlier suspension to the scheme whilst a potentially material transaction was being pursued, has shone a light on how these arrangements operate in practice.
In October, Octopus announced a restructuring involving Fern Trading Limited, the principal holding for OITS investors which is managed on a day-to-day basis by Octopus. Fern had invested heavily in fibre broadband infrastructure through a number of operating businesses. Following a review of performance across the portfolio, shares in Fern were divided into two separate classes.
One class contained stronger-performing and more liquid assets, while the other held a collection of wholesale fibre investments that had failed to deliver the anticipated returns. Investors received interests in both classes automatically, broadly in proportion to the value allocated to each part of the portfolio.
Business investments sometimes underperform and restructurings are not unusual. What has attracted attention in this instance is the profile of the product and the way Business Relief investments are often discussed.
Tax relief, not risk relief
Investors are frequently introduced to these arrangements through their tax benefits, which can sometimes overshadow a more detailed consideration of the underlying investment proposition.
The tax relief does not alter the fundamental investment risk. Investors remain exposed to the performance of the underlying businesses. Valuations can fall, liquidity can become constrained and exit opportunities may be limited. We are not presently aware of comparable liquidity issues affecting other Business Relief investment services. However, the questions raised by OITS are not unique to it: they are inherent features of many investments in unquoted companies.
The restructuring also illustrates an important distinction between Business Relief investments and more conventional investments such as listed securities or cash-based products. The value of underlying assets may be difficult to determine with precision, secondary markets may be limited and access to capital can depend on managers successfully realising assets over time rather than investors being able to sell whenever they choose.
For advisers, this serves as a timely reminder of the importance of looking beyond tax qualification alone. The nature of the underlying assets, the concentration of risk, liquidity arrangements and potential exit routes all warrant careful scrutiny. A Business Relief investment may satisfy a client’s estate planning objectives while still carrying a level of commercial risk that needs to be properly understood and managed.
The developments are also likely to prompt renewed scrutiny of how Business Relief products are presented to prospective investors. Tax benefits are often a significant part of the conversation, but they should not be viewed in isolation from the investment characteristics that ultimately determine outcomes.
This is particularly relevant following the changes introduced to Business Relief in April 2026, which have increased focus on the role of Business Relief within estate planning. As advisers and investors continue to assess the evolving landscape, questions of risk, liquidity and accessibility are likely to feature more prominently in discussions about suitability.
OITS’ experience should not be taken as representative of every Business Relief investment. However, it demonstrates how outcomes can diverge from expectations when underlying assets fail to perform as anticipated. For investors, the episode reinforces the importance of understanding not only the tax treatment of an investment but also the businesses in which their capital is being deployed.
Business Relief remains a valuable planning tool for many individuals. However, tax relief does not insulate investors from commercial risk. Ultimately, the success of any Business Relief strategy depends not only on its tax efficiency but on the long-term performance of the businesses that sit behind it.
This article was originally published in FTAdviser.
