With tax allowances frozen by The Chancellor at the last Spring Statement and rising inflation there has been an increase in the number of people finding themselves with an inheritance tax issue. This is also affecting financial advisers who are spending more of their time helping clients with their Inheritance Tax planning to navigate this issue.

Something which helps both parties is that AIM shares can be held in a client’s ISA wrapper and on many adviser platforms.

Want to hear more? Join us for our webinar session on Wednesday 27^th October at 2pm where we will be discussing The benefits of Direct Equity Investment and AIM Quarterly Update.

AIM

AIM is the London Stock Exchange’s market for smaller companies. It has developed into the world’s most successful and established market for dynamic high-growth companies with access to a wide range of countries and sectors.

AIM is designed to help smaller companies access capital from the public market. AIM allows these companies to raise capital by listing on a public exchange with much greater regulatory flexibility compared to the main LSE stock market.

Business Property Relief

AIM shares that qualify for business property relief and held for at least two years do not form part of the estate for inheritance tax calculation purposes and can be passed on after death tax-free. This means AIM shares can be used to mitigate against the 40% potential inheritance tax bill which could apply to these assets.

The two-year clock starts ticking from the time you make the investment in qualifying shares. Subsequent investments start a new clock ticking so accurate records must be kept on different durations. If you sell after two years, you have three years to reinvest the proceeds back into qualifying shares for the benefit to continue without starting the two-year clock again. And lastly, you must be invested at the point of death.

AIM ISAs

AIM ISAs have been around since 2013, when the Government changed the rules to allow investors to hold AIM-listed shares within an ISA for the first time. This means qualifying business property relief AIM shares can be held within a tax- efficient stocks and shares ISA wrapper. AIM ISAs get the same tax breaks as other ISAs: any growth or income from the shares is tax-free.

The maximum amount you can pay into an AIM ISA in any given tax year is determined by the ISA allowance at the time as set by the government. For the current tax year 2021/2022 this is £20,000.

An investor can transfer their full current year’s ISA subscriptions or all or part of previous year’s ISA subscriptions into an AIM ISA. Transfers within an ISA should not create a CGT event.

Platforms

IHT solutions used to only be available directly with investment managers, with advisors forced to direct assets off their designated wrap platform in order to access these.

Adviser platforms have now evolved to let clients invest in individual stocks, including those listed on AIM, and even allow Discretionary Fund Managers (DFMs), such as Fundamental Asset Management, to manage portfolios of AIM stocks on platform on behalf of clients.

This means you can offer AIM for Inheritance Tax planning solutions to your clients and keep their assets in one place, thereby retaining the benefits a platform has to offer.

With a platform clients benefit from reduced dealing, product, custody and investment costs as well as giving them access to investment products they would not normally be able to access by going directly.

Advisers benefit from being able to manage everything in one place, reducing time on administration and allowing for more time to be spent with clients. Furthermore, the platform technology itself allows advisers to take advantage of an advanced reporting system.

Platforms are also beneficial for investment managers like Fundamental Asset. The ability to manage client portfolios in one place and to remove custody risk from our own business model is a key advantage. As such, we are committed to the IFA and platform markets and work closely with our platform partners, including Standard Life Wrap, Elevate, Nucleus, Transact, Ascentric and Funds Network.

You can hear more about the outperformance of AIM from our CPD adviser webinar session: Is AIM heading for a fall… or is its outperformance set to continue?

The Fundamental AIM IHT Portfolio is a discretionary investment management service where clients can obtain 100% mitigation from Inheritance Tax, benefit from the capital growth afforded by the AIM market and retain control of their assets.

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 17 years, from the link here.

At the end of September 2021 there were 835 companies on AIM, with the total market value of London’s growth market £149 billion. This compares to 836 companies at the end of August 2021, when AIM’s market value was also £152 billion. September also saw a reduction in the number of AIM companies valued at over £1 billion falling to 28 from 30 in the previous month.

The AIM index as a whole fell 3.8% in the month, underperforming the UK index of 100 largest main market companies, which was only 0.46% lower. Looking at these numbers year-to-date AIM trails behind the FTSE 100 with 7.5% return against 9.69%.

However, this doesn’t tell the full story. AIM is a market with many growth focussed and successful businesses at the higher end but given its smaller company start-up nature it is also a market with companies yet to come into their own and even others which are yet to make a profit. In fact, since the start of this year, AIM has welcomed 61 newcomers coming from a broad range of sectors with market capitalisations extending up to £1 billion.

AIM is a stock pickers market which is clear from the consistently strong performance made by AIM portfolio managers in the space. For example, our own Fundamental Asset portfolio has returned 20.7% year-to-date.

Interested in hearing more about AIM as one of the world’s most successful growth markets? Then why not watch our webinar session to hear more: Is AIM heading for a fall… or is its outperformance set to continue. 

Inheritance Tax Receipts

Inheritance tax (IHT) planning is a growing area helped recently by the Chancellor, Rishi Sunak’s, decision to freeze allowances until 2026.

Official figures from HM Revenue & Customs (HMRC) have revealed that IHT receipts for April to August this year were £2.7bn – £0.7bn higher than the same period a year earlier.

There are a few reasons for this. Yes, the IHT nil-rate band has not risen since 2009 and yes, the majority of wealth in the UK is owned by over 60s which is the age bracket where Covid-19 resulted in more deaths than usual. But more significantly, estate values have risen in the last year mainly due to strong investment returns and property value rises. Expect this to rise farther. Inflation and house price rises are expected to continue and with the freeze on allowances more and more people will find themselves with an IHT issue as we move towards 2026.

You can find out more about the benefits of investing in AIM for IHT planning purposes in our free report available from the link here.

The Fundamental AIM IHT Portfolio is a discretionary investment management service where clients can obtain 100% mitigation from Inheritance Tax, benefit from the capital growth afforded by the AIM market and retain control of their assets.

You can find out more about Fundamental Asset Management’s high performing AIM IHT ISA and AIM Inheritance Tax portfolio service, which has been delivering exceptional investment returns for more than 17 years, from the link here.