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Did you know? AIM shares can be held in ISA and on platform…

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 27th 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.


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AIM- a market full of opportunity

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.


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Investing in UK smaller companies – the benefits of direct equity investment vs collective investment schemes

Collective Investment Schemes are commonplace in UK investment management and are the overwhelming choice for UK retail investors for use within their ISA and SIPP tax-wrappers when looking for exposure to UK smaller companies. But are they all that they seem and are they the only choice? Models of directly held equities are often overlooked but investors could be missing out on the added value models bring over collective investment schemes.

UK smaller companies prove themselves to be big outperformers on the global stage

Texas based fund manager Alta Fox, published an analysis of the best performing small-listed companies in the developed world. This was over the five years from 2015-20 and companies were required to have positive revenue growth and earnings before taxation, interest and depreciation for the previous 12 months. This included companies in North America, western Europe and Australia valued at $150m- $10bn, and that had generated a total shareholder return of at least 350% over the five-year period (35% a year compounded). It excluded all companies in the energy, materials and financials sectors.

Of the 104 companies to make the final cut, 55.7% were from Western Europe vs 32.7% from North America. 13.46% of the top performing companies were found on AIM while only 2.88% were on the UK Main Market. 21.15% were on the Nasdaq, with technology overall making up only 34% of the total.

US companies made up 28.8% of the total, with the UK in second place with 15.4%.

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?

Key benefits

Model portfolios give you full visibility and knowledge of all holdings, not simply the ‘Top 10’. This means you can see exactly what you are investing in.

Portfolios of shares are priced at the market price of the underlying holdings and most closed ended small/micro-cap funds trade at a discount to net assets (discounts typically widen during market sell-off), some as high as 19%.

The nature of segregated portfolios of shares means individual investors interests are not bundled with those of others. They therefore benefit from greater liquidity, an ability to sell when needed. Open ended funds holding small-cap shares are very hard to manage given the fluid nature of subscriptions and redemptions. During market sell-offs fund managers will be struggling to manage redemptions which will require them to sell holdings, thereby exacerbating share price declines.

Liquidity is an important investment fundamental not to be over looked. The illiquid nature of small cap holdings worsened the return for holders of Woodford’s fund and ultimately enforced its closure.

Low Costs

Direct equity portfolios standard management fee is around 1%, often less for larger accounts. On top of this, portfolios do not charge often sizable performance fees and trading costs, notably on adviser wrap platforms, are extremely low.

The cost of running closed ended funds with a focus on small caps is very high, with the Total Expense Ratio (‘TER’) of those we have seen ranging from 1.34% to as much as 7.50% where a performance fee has been charged.

Stated fund TERs also ignore the impact of trading costs. Venture Capital Trusts with a focus on AIM quoted companies also trade at discount with high TERs and performance fees.

Direct equity portfolios managed on behalf of individual clients can easily acquire positions in smaller companies. Closed-ended small cap funds struggle to pick up positions of size in their target investments.

Direct equity investment via portfolios encourages efficient portfolio structure and the avoidance of over-diversification. Open-ended small cap funds are often over-diversified, holding hundreds of positions. This is often due to the less liquid nature of smaller quoted companies

One popular Investment Trust we have come across has 360 different company holdings, with the top 10 only accounting for 17% of net assets.

And finally…..

UK investors in collective investment schemes (funds/investment trusts/VCTs) holding AIM shares don’t benefit from the tax advantages available to those UK investors having direct holdings in the companies.

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.

Disadvantages

  • The management of capital gains is harder via a segregated portfolio.
  • It’s much harder to judge performance
  • Segregated portfolios can be prohibitively costly for smaller accounts of less than £40k

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.


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Investors flock to AIM for Inheritance Tax planning

According to The Openwork Partnership, one of the UK’s largest networks of financial advisers, there was a 38% spike in demand for advice on Inheritance Tax (IHT) planning in the past year, with more than one in ten clients wanting to discuss it. This demand is set to increase significantly with latest data from HMRC showing IHT receipts for April to July 2021 of £2.1billion, £500million higher than the same period a year earlier. This is good news for the UK government which is looking at ways of paying for a generous furlough scheme and other Covid-19 support measures. It is however bad news for those looking to reduce IHT, as any increase in IHT tax receipts for the government has a knock-on effect of reducing the amount of assets left to loved ones.

In the Spring Budget, the Chancellor of the Exchequer, Rishi Sunak, announced that the Lifetime Pension Allowance (LPA), nil-rate band (NRB) and residential nil-rate band (RNRB) will be frozen until April 2026. This means the LPA will remain at £1.0731m, the NRB at £325,000 and the RNRB at £175,000 during this time.

In practice, more and more people will find themselves with an IHT issue as asset prices rise with inflation, but IHT allowances remain fixed. House prices alone saw a 2.1% month-on-month increase in August, the second biggest gain in 15 years. This is a key factor helping to explain the sudden popularity of IHT planning by clients and the increase in use of IHT efficient investment products.

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 Office for Budget Responsibility (OBR) is predicting that the next two years may see a slight decline in IHT receipts, due to the effects of the pandemic. That said, they expect the changes made in the budget will see the Government collect an extra £450 million pounds in IHT by 2025/26.

To encourage investors to support smaller growth businesses, the government offers a tax relief called Business Relief (BR). Many companies can qualify for this tax relief, including many companies listed on AIM. Once shares in qualifying companies have been owned for a minimum of two years and until the point of death, the shares are free from IHT. Furthermore, since 2013, AIM shares can be held in an ISA which means that investors can enjoy tax free growth and income on any gains made. This means that investors holding BR-qualifying AIM shares within an ISA can create a tax-efficient investment with no Income Tax, Capital Gains Tax or Inheritance Tax.

Want to hear more? Join us at 2pm on Wednesday 15th September for our upcoming CPD Adviser webinar session- How can AIM help your clients’ Inheritance Tax planning?  

 

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.


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AIM continues to be the big winner in London’s markets

July 2021 has been the best month since December 2014 for IPOs on the AIM market, with 16 new arrivals and five departures.

IGTV’s Jeremy Naylor discusses the sector breadth of the new listings and the opportunities for investors with Chris Boxall from Fundamental Asset Management.

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.


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AIM shares can help cut your Inheritance Tax bill

Business Property Relief (BPR) is a valuable tool which can be used to help you reduce your Inheritance Tax bill.

In a nutshell, if you hold a BPR qualifying asset for two years and until death then that asset will be exempt when calculating how much of your estate will be liable to Inheritance Tax on your death.

Unquoted shares in a company fall within the remit of BPR. And crucially, the term “unquoted” has a broad definition which includes companies listed on AIM, the junior market of the London Stock Exchange.

As such, qualifying AIM shares will not count as part of your estate for Inheritance Tax purposes and none will be due on those assets, even if your estate exceeds the threshold at which your heirs would normally have to pay 40% tax.

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.

One of the golden rules of financial planning is never to “let the tax tail wag the investment dog”. This is true in the case of AIM shares which should not be bought just for the tax break. Although the tax benefits are significant, AIM shares should be bought first and foremost for their investment potential. The good news is that AIM is one of the most successful growth markets in the world. However, it should be considered a high-risk investment.

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

It is possible for investors to build and manage their own portfolio of AIM investments. However, such an investor will need to be confident in their ability to choose investments wisely, qualify those investments up until the point of their death for BPR qualification, manage their own administration when buying stocks directly and stay on top of any changes to the applicable tax rules.

The alternative is to work with an investment manager specialising in building tax-efficient investment portfolios. AIM shares as part of a well-diversified and professionally managed investment portfolio carefully structured according to your attitude to risk and your financial goals can be a useful way to plan for inheritance tax. AIM shares can also be included in an ISA where investors will benefit further from tax-free income and capital gains on growth.

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.

 

AIM IHT ISAs can be higher risk, more volatile and less liquid when compared to conventional ISAs. Tax rules can change and benefits depend upon circumstances.


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What is the reason for the increase in IPOs on AIM?

AIM, is one of the London Stock Exchange’s great success stories. However, back in 2008 the London’s growth market began to see a decline in the number of new listings. This was a direct result of the financial crisis and the global uncertainty that followed.

Given the nature of AIM, there will always be companies which are taken over by a competitor, merge, delist, join the FTSE main market or occasionally even fail – thankfully the last of these is far less frequent than it used to be. AIM therefore requires a steady flow of new listings to maintain numbers and replace the leavers.

AIM reached its peak in number of listed companies in 2007 at 1,694, when the resources boom saw a lot of small early-stage oil and gas companies and many overseas companies also join, many of which were of questionable quality. In July 2021 this number was at 832, less than half its peak.  Our associates Investor’s Champion cover all the new arrivals to AIM in July in their update here.

Many large companies which could qualify to be on the FTSE main market have become all too happy to remain on AIM, lifting the total market value. There are several reasons for a large company to remain on AIM: Business Relief investment might provide a welcome additional source of capital, they may prefer the reporting regime on AIM, owners and major shareholders might appreciate the Business Relief benefit for their own Inheritance Tax planning. As a result of this, AIM has seen a decline in the number of companies listed but a significant increase in total market value and quality of companies.

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.

Has this downward trend continued?

No. In fact from Q4 2020, the number of companies joining AIM began to increase and the rate of companies leaving the market began to slow. As a result, by the end of Q2 2021 the number of companies on AIM had increased by 13, raising £664m. The market also broke its record with the largest new admission in the second quarter of the year, as Victorian Plumbing Group raised £298m upon listing, with its market capitalisation £850m. The positive trend has continued with July 2021 the best month since December 2014 for IPOs on AIM, with a couple of very large new arrivals further highlighting the growing appeal of AIM for larger, high-growth companies.

Why are companies listing?

Many believe the reason for the change in direction is because some companies held back on their IPO plans during 2020 due market uncertainty brought on by Covid and Brexit. Going into 2021, the UK Covid vaccine strategy began to roll out which dramatically reduced the number of deaths from the virus. The Brexit deal agreed in the latter part of 2020 gave further reassurance to markets. A combination of the two could be the reason we are seeing more and more companies listing on AIM through 2021.

 

Interested in hearing more about how AIM for IHT works? Then why not watch our webinar session named All you need to know about investing in AIM for inheritance Tax where we delve into the subject in more detail.

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.

AIM IHT ISAs can be higher risk, more volatile and less liquid when compared to conventional ISAs. Tax rules can change and benefits depend upon circumstances.


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Is AIM outperformance set to continue?

AIM has been the envy of growth markets around the world for some time now. It significantly outperformed London’s main market in all key areas during the Covid-19 crisis and has also significantly outperformed over the past 5 years.

The make-up of AIM has changed considerably since it began back in 1995 when it was considered the wild west of investment markets. Today is a very different picture.

AIM has become a very well-rounded market with many highly profitable, well-established and fast-growing companies. AIM has large exposure to some of the economy’s best performing sectors such as technology and is the marketplace of choice for many exciting new UK growth companies.

But can it last? Are valuations too stretched? Is there a correction around the corner? Could the tax benefit rug be pulled from under its feet? Should you be concerned?

Watch the recording of our session Is AIM heading for a fall… or is its outperformance set to continue?  where we discussed these questions and more.

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.

Interested in hearing more about how AIM for IHT works? Then why not watch our webinar session named All you need to know about investing in AIM for inheritance Tax where we delve into the subject in more detail.

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.

 

AIM IHT ISAs can be higher risk, more volatile and less liquid when compared to conventional ISAs. Tax rules can change and benefits depend upon circumstances.


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Is your ISA at risk of a 40% Inheritance Tax charge?

If you are one of those people who have been saving into an ISA throughout your working life, then you are most likely to be in the fortunate position of having grown this investment into a significant asset. Investing into an ISA was a good move as it offers you tax-free growth and income on your savings. So far so good. However, if you are at the stage in life where you ought to be considering your estate for Inheritance Tax (IHT) then you may have an issue.

An ISA can be liable to a 40% claim by the taxman through Inheritance Tax at the time of your death, significantly reducing the value of your estate and the amount of assets that will pass to your loved ones.

What can you do about this?

One proven and simple solution is to transfer your existing ISA into an AIM IHT ISA managed by an experienced investment team. This could allow you to:

  • mitigate 100% potential Inheritance Tax if held for two years and on death
  • benefit from the leading growth potential offered by AIM as one of the world’s leading growth markets
  • continue to benefit from tax-free income and growth within the ISA wrapper
  • retain control of your assets- you can make withdrawals if needed

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.

Interested in hearing more about how AIM for IHT works? Then why not watch our webinar session named All you need to know about investing in AIM for inheritance Tax where we delve into the subject in more detail.

AIM, London’s growth market, has materially outperformed the UK main stock market for a number of years, reflected in the very strong performance of AIM for IHT planning portfolios.

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.

 

AIM IHT ISAs can be higher risk, more volatile and less liquid when compared to conventional ISAs. Tax rules can change and benefits depend upon circumstances.


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IHT receipts up a staggering 54% for April and May compared to the same period in 2020

Inheritance Tax (IHT) receipts were up an incredible 54% for April and May compared to the same period in 2020. Good news for the Chancellor, bad news for those looking to reduce IHT!

These figures are according to data published in a recent HM Revenue & Customs bulletin. The report confirms that full-year IHT receipts for 2020-2021 amounted to £5,326 million, a £204 million increase from the year before. In fact, for the period of April 2021 to May 2021, total receipts amounted to £966 million, an increase of £340 million on the same period last year.

What could be the reason for this?

In the report, HMRC stated that the increase could be due to “high volumes of wealth transfers that took place during the Covid-19 pandemic”. However, they cannot verify this until more data becomes available.

Another reason could be recent tax freezes, imposed earlier this year in the Spring Budget by Chancellor of the Exchequer Rishi Sunak. The Chancellor announced that both the nil-rate band (NRB) and residential nil-rate band (RNRB) will be frozen until April 2026, resulting in the NRB remaining at £325,000 and the RNRB at £175,000 during this time.

In practice, more and more people will find themselves with an IHT issue as asset prices rise with inflation and IHT allowances remain fixed. Some have referred to these measures as a ‘stealth’ tax mechanism that will, over time, bring significant tax receipts for the Treasury.

Concern is beginning to grow over the possibility that IHT and CGT liabilities could be increased as the government continues to consider its options to recover debt incurred by the pandemic.

One proven, simple solution to mitigate potential IHT, and also benefit from ongoing capital growth, is through investment in the shares of qualifying AIM companies.

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.

AIM, London’s growth market, has materially outperformed the UK main stock market for a number of years, reflected in the very strong performance of AIM for IHT planning portfolios.

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.