While the Sustainable MPS team believes that equities are broadly attractive, they have primarily continued to allocate to US and core-style global equity funds.

In the latest re-balance they added to positions  in the FTGF ClearBridge US Equity Sustainability Leaders and Brown US Sustainable Growth funds. In global equities, they added to holdings* in the Impax Environmental Markets, Schroder Global Sustainable Value, CT Responsible Global Equity, Baillie Gifford Responsible Global Equity Income and Federated Hermes Global Equity funds.

Within fixed income the managers continue to favour sovereign bonds over corporate credit.

Philippa Douglas, assistant manager of the Evelyn Partners Sustainable MPS said: “Across all models we switched from the JPM Global Macro Sustainable fund into Trium Climate Impact fund in the Absolute Return allocation. The shift is part of an exercise to reduce equity correlation in the Absolute Return allocation.

“Trium Climate Impact is a market neutral hedge fund which invests in mid and large cap climate solutions in its long book and hedges out volatility, factor and style risk in its short book. The team seek significantly higher avoided emissions than direct emissions in potential investee companies, as well as contributions to clean water, less waste, the circular economy and improved efficiencies. The fund targets a return of cash plus 6-8% and volatility of 6-8% with low correlation to traditional asset classes and driving positive environmental outcomes.

“Within the moderate to higher risk models we switched out of the RobecoSAM Smart Materials into the Regnan Sustainable Water and Waste fund. This reflects our preference for the more defensive nature of the water and waste theme, which is integral to daily life throughout the economic cycle, as well as the structural growth drivers for these sectors as global population increases and urbanises. Additionally, the team’s focus on quality characteristics of businesses and the sustainability of their investee companies’ operations reflects our own investment philosophy well.”

In its interim financial results highlights (unaudited) for the six months ended 30 June 2024, the business generated £3.5bn of gross inflows (H1 2023: £3.8bn), equivalent to an annualised growth rate of 11.8%, with net flows remaining positive (H1 2023: £1.8bn), with elevated outflows reflecting the impact of higher interest rates on clients.

Strong growth in operating income combined with cost management resulted in a 18.3% increase in adjusted EBITDA to £103.9m.

A £2.6bn increase in AUM (H1 2023: £0.1bn) was attributable to positive market movements and investment performance.

Group operating income increased 10.3% to £360.8m (H1 2023: £327.2m)

A 23.4% growth in Professional Services operating income reflected continued strong organic growth alongside the contribution of acquisitions made last year.

The 5.2% growth in Financial Services operating income was driven primarily by an increase in average AUM.

Adjusted EBITDA increased 18.3% to £103.9m (H1 2023: £87.8m), with adjusted EBITDA margin2 rising to 28.8% (H1 2023: 26.8%).

Paul Geddes (pictured), group chief executive, said: “We have made a great start to the year supporting our clients in addressing their financial needs and delivering strong financial performance. Healthy top-line growth combined with a disciplined approach to managing our costs, resulted in a 18.3% increase in adjusted EBITDA, which is our key measure for underlying cash profits.

“In Professional Services, we continued to see strong organic growth in fee income and the benefit of the five acquisitions we completed last year coming through. We will build on this over the coming months, with the recently announced acquisition of the Manchester, Leeds and Newcastle offices of Haines Watts which has brought us 150 new colleagues. In our Financial Services business, positive market movements in the first half and resilient new business generation have delivered higher AUM and operating income.

He added: “Since the merger in 2020, Evelyn Partners has demonstrated the strength and resilience of its business model in challenging market conditions, including during the pandemic and subsequently in an environment of high inflation and interest rates. Despite this we have delivered net inflows of new assets every quarter since the merger. Our Professional Services business has shown consistently strong growth in operating income, offering a broad range of services to private clients and businesses.

“With inflation having settled back and the first interest rate cut made in the UK, there are good grounds to be positive on the medium-term outlook despite the turbulence seen in global equity markets in recent days. Evelyn Partners is well positioned to support clients navigate periods of market volatility and with potential changes to tax and pensions on the horizon we also expect to see strong demand for financial advice in the second half of the year.”

The teams in these locations provide a wide range of services and solutions to support entrepreneurial, owner-managed businesses.

The acquisition will bring five partners, nine directors, and over 150 colleagues from Haines Watts into Evelyn Partners fast growing Professional Services business, significantly strengthening its presence in the north of England.

Picture above: L-R: David Fort (Haines Watts), Rick Chana (Evelyn Partners), Donna Bulmer (Haines Watts), Antony Sassen (Haines Watts), Tom Shave (Evelyn Partners), James Sutton (Haines Watts), Fiona Cresswell (Haines Watts) and Jonathan Scott (Haines Watts)

Andrew Wilkes, chief professional services director of Evelyn Partners, said: “We are delighted to welcome the team and clients of these three former Haines Watts offices to Evelyn Partners. The team, led by Donna Bulmer, are high-quality professionals with a long-standing track record of giving clients the best possible tax advice and accountancy solutions.

“Their approach of providing a fully supportive, personal service and building long-standing relationships with clients is very much in line with our culture at Evelyn Partners.

“This acquisition continues our strategy of expanding the number of business and private clients we provide our professional services to in the north of England.”

Donna Bulmer, managing partner of Haines Watts said: “This is an exciting time for our clients and our team as we join forces with our new colleagues at Evelyn Partners. We see a great cultural fit that will ensure we continue to deliver high service levels to our clients, whilst creating fantastic opportunities for our team.”

The deal is due to complete on 2 August.

In 2023 Evelyn Partners acquired Leathers LLP (Newcastle and Harrogate), Ashcroft Partnership LLP (Cambridge), Creaseys (Tunbridge Wells), Harwood Hutton (Beaconsfield) and a leading international disputes team for its Forensic Services practice.

Toby Tallon, tax partner at professional services and wealth management group Evelyn Partners, provides an overview of what is expected and how it could impact businesses and individuals:

Labour’s first budget

The Labour manifesto includes a commitment to hold only one fiscal event each year, with significant fiscal events subject to an independent Office of Budget Responsibility (OBR) forecast. With party conferences being held in late September/early October, it would not be a surprise to see an October Budget.

Labour has committed to presenting a statement to Parliament on the state of spending by the end of July. Rachel Reeves also noted that, “This will be separate from a Budget that will be held later this year – and I will confirm the date of that Budget, alongside a forecast from the Office for Budget Responsibility, in due course.”

With the manifesto fairly quiet on inheritance tax, what changes could we see in the Budget, and over the course of this Parliament?

Labour’s plans for inheritance tax

The only official statement in Labour’s manifesto about inheritance tax is that it will ‘end the use of offshore trusts to avoid inheritance tax’. The proposed changes for non-doms and to offshore trusts are significant and may well require a substantial rewrite of the inheritance tax legislation. While other inheritance tax changes are not confirmed nor ruled out, updating the legislation to reflect these proposals may provide Labour with an opportunity for further and more sweeping inheritance tax reform.

If the new Government did increase inheritance tax, what might it do? While the manifesto is silent on this, a number of areas have come up in discussions, mainly reliefs. The new Chancellor Rachel Reeves said in 2021 that she would look at “every single tax break”.

In November, the then shadow (now actual) environment secretary Steve Reed, said that Labour had no intention of changing agricultural property relief (APR). This is of course not a binding statement. APR is a very valuable relief for farming families, and the Country Land and Business Association has raised concerns about the impact of scrapping it, commenting on the particular impact on small farms, with less resources to raise cash to pay an inheritance tax bill without selling land.

There has been no equivalent promise on business relief (BPR), and this is considered to be a likely target, though it may be more likely to be reformed rather than completely abolished.

What changes could we see to BPR?

Business Property Relief (BPR) was originally introduced as part of the 1976 Finance Act, by a Labour Government, and its aim was to ensure that family-owned businesses could continue to trade after a death. Currently, to allow farms and other family-owned businesses to continue without major disruption to the business on the death of an owner, agricultural property relief and business relief can apply to these assets.

Where the criteria for these reliefs are met, agricultural land and businesses can be inherited tax free. Two particular areas where reform is rumoured include:
• Capping BPR and APR reliefs – a recent IFS report recommended capping these reliefs at £500,000 per person
• Changing the requirement for the level of trading activity a business must take to qualify, potentially from 50% to 80%
Impact of significant BPR reform

If these reliefs were abolished or significantly restricted, the application of a top rate of 40% inheritance tax would in many cases mean the business had to be sold on the death of the current owner to pay the tax bill. This would have significant implications for the employees and the stability of the business.

Very wealthy individuals may have other assets from which to pay inheritance tax, so this would be a particular burden to those whose farm or business is their main asset and livelihood. The current legislation has been regarded as demonstrating sound commercial sense in allowing businesses to continue without the looming risk of a forced sale on death. Farming businesses would often become unviable if a substantial proportion has to be sold.

These reliefs have previously attracted criticism, with the implication being that wealthy individuals may invest in farmland or small businesses purely to shield their wealth from inheritance tax. However, a report commissioned by HMRC in 2017 noted views of taxpayers and advisers that inheritance tax planning was primarily driven by a desire to keep businesses and farms intact on the death of the owner. A reduction in inheritance tax liabilities was found to be a secondary concern.

In the days of estate duty, when there was no equivalent of business property relief, studies indicate that companies chose to hold significant cash reserves against a potential estate duty charge, with obvious impacts on companies’ ability to invest for the future and manage cash flow.

Impact of significant BPR reform

If these reliefs were abolished or significantly restricted, the application of a top rate of 40% inheritance tax would in many cases mean the business had to be sold on the death of the current owner to pay the tax bill. This would have significant implications for the employees and the stability of the business.

Very wealthy individuals may have other assets from which to pay inheritance tax, so this would be a particular burden to those whose farm or business is their main asset and livelihood.

The current legislation has been regarded as demonstrating sound commercial sense in allowing businesses to continue without the looming risk of a forced sale on death. Farming businesses would often become unviable if a substantial proportion has to be sold.

These reliefs have previously attracted criticism, with the implication being that wealthy individuals may invest in farmland or small businesses purely to shield their wealth from inheritance tax. However, a report commissioned by HMRC in 2017 noted views of taxpayers and advisers that inheritance tax planning was primarily driven by a desire to keep businesses and farms intact on the death of the owner. A reduction in inheritance tax liabilities was found to be a secondary concern.

In the days of estate duty, when there was no equivalent of business property relief, studies indicate that companies chose to hold significant cash reserves against a potential estate duty charge, with obvious impacts on companies’ ability to invest for the future and manage cash flow.

AIM shares

BPR also applies to shares in unlisted companies, which for the purposes of this relief includes shares listed on the alternative investment market (AIM). This application to AIM listed shares has garnered press attention in recent months and could be an area that is targeted.

This is on the basis that investing in them has become increasingly popular as a tax planning strategy and may not meet the policy objectives of the relief anymore.

Pensions

Currently, pension funds are exempt from inheritance tax. Rumours indicate that Labour could seek to include pension fund in the taxable estate on death, though there is no hard information. Any change may well include spousal transfer exemptions and there is speculation that this could come with a new pension nil rate band.

Previous reports recommending IHT reform

Labour might draw from past reports when considering any inheritance tax changes. Options suggested by an All Party Parliamentary Group in 2020 included introducing a charge on lifetime gifts, their suggestion being 10% over a £30,000 annual allowance and abolishing agricultural property relief and business relief in favour of a system where the inheritance tax charge was spread over 10 years. The IFS report suggests bringing pension funds held at death into the inheritance tax net, alongside capping BPR and APR as mentioned above.

More recently, the policy thinktank Demos has just published a report analysing the inheritance tax system and options to improve it. This extensive report looks at several options, and compares the UK system to other countries’ models, but its key recommendations include:
• Make changes to business property relief, which it feels could provide more value for money
• Introduce progressive rates
• Remove the capital gains tax uplift on death

It is hoped that any significant change will be introduced though consultation, allowing more time to plan for future changes. Those whose business depends heavily on the availability of a particular relief may wish to take advice now. Bringing forward planned gifts and concluding on ongoing projects which may be affected should be considered, although always bearing in mind that tax is only part of the equation.

Platts will join the business in August as regional managing partner across the three regions.

Platts (pictured) has 35 years’ experience in wealth management and joins from Nationwide Building Society where, as director of financial planning, she led a team of 330. Prior to that she was head of wealth at Santander UK, overseeing the group’s private banking and branch based financial planning business. She has also held senior roles at HSBC Private Bank and Investec.

Reporting to Emma Sterland, chief financial planning director at Evelyn Partners, Platts will work with managing partners in the north of England, Scotland and Northern Ireland to drive continued growth in the group’s Aberdeen, Belfast, Edinburgh, Glasgow, Knutsford, Leeds, Liverpool, Manchester and Newcastle offices.

Emma Sterland, chief financial planning director at Evelyn Partners said: “I’m delighted to welcome Charlotte to Evelyn Partners. Charlotte is a highly experienced wealth management professional who shares our commitment to deliver high quality Financial Planning services to our clients. Charlotte’s extensive experience in growing and leading teams at large firms will be invaluable as we continue with our ambitious plans to expand our presence in the north of England, Scotland and Northern Ireland.”

Platts added: “I am delighted to be joining Evelyn Partners at this exciting stage and am very much looking forward to the opportunities that lie ahead. In particular a return to a focus both on wealth management and the North region where I hope I can bring my knowledge and experience to help develop an already successful business for the benefit of our clients and colleagues.”