What is the AIM share?
AIM is the London Stock Exchange’s international market for smaller growing companies and is home to just over 900 companies. AIM used to be an abbreviation of ‘Alternative Investment Market’, but now it’s just AIM. Contrary to what you might have read in the popular press, AIM is no longer just about highly speculative micro-cap companies that may never generate a profit. There are now hundreds of AIM companies with a history of generating excellent profits, loads of cash, and attractive dividends.
Inheritance Tax
Taxpayers were expected to reduce their Inheritance Tax (IHT) bills by 12% over the next year, or a record £710m in 2017/18, through investments made in unlisted companies and other business assets, said UHY Hacker Young. Investments in qualifying AIM-listed companies, Enterprise Investment Schemes (EIS), and other private companies have become increasingly popular over recent years as these assets are often exempt from IHT. Investors have also benefited from exceptional investment gains as AIM has materially outperformed the main stock market over the past few years. This is reflected in the outstanding performance of AIM portfolios managed by Fundamental Asset Management and other providers.
How Tax Cuts Work With AIM
Investment in ‘qualifying’ AIM companies can attract 100% relief from Inheritance Tax provided that the investment is held for at least two years.
What Shares Qualify for AIM
AIM’s Inheritance Tax benefits fall under the rules governing Business Property Relief (‘BPR’) or Business Relief as it is now called BPR dates from 1976 and had the broad intention of facilitating the transfer of family businesses to the next generation, free of Inheritance Tax. Once BPR-qualifying shares have been owned for at least two years, they can be passed on free to anyone from inheritance tax on the death of the shareholder. HMRC considers that AIM securities do not meet the HMRC definition of ‘listed’ for the purposes of HMRC legislation, accordingly AIM securities are also considered to be ‘unquoted’ for BPR purposes, much like a private family company. Not every AIM company qualifies for BPR and the rules are quite complicated but broadly businesses that carry on a trade rather than investment activities could qualify for BPR.
Is AIM Share a Good Investment?
AIM portfolio service June 2018 marked the 23rd anniversary of the launch of AIM and, in the two decades since launch, it has undergone significant change. Created as the junior division of the London Stock Exchange to act as a platform for smaller and growing companies to raise capital, when it launched in 1995 AIM had just 10 UK-listed companies to its name. Some nine years later when Fundamental launched its AIM IHT Portfolio service in September 2004 – a service that invests in Business Property Relief (BPR) qualifying AIM companies for inheritance tax planning purposes it had expanded to just under 1,000 companies.
The overall result of all this is that that AIM’s volatility compared with that of the main market has reduced substantially since its early days.
If you are over the IHT tax rate, and are looking at IHT tax please feel free to get in touch below.
