It’s 10 years since ISAs were allowed to hold AIM shares for the first time. So how has AIM changed over this time and why was the change in ISA rules so relevant for AIM?

A significant moment in the history of AIM

The change in ISA rules on 5^th August 2013 to allow ISAs to hold AIM shares encouraged many UK investors to allocate a larger element of their investment portfolio to AIM than had been the case up until then, both through ISA transfers and the annual ISA allowance.

This change in the law, also opened a new opportunity for investors to start Inheritance Tax (‘IHT’)  Planning with their ISA, through investing in the shares of Business Relief qualifying AIM companies (formerly Business Property Relief or ‘BPR‘).

ISA transfers of greatest relevance

The ability to transfer an ISA was particularly relevant, as it avoided the Capital Gains Tax restrictions many investors faced beforehand when considering selling out of main market shares or collective investment schemes and moving into AIM shares.

You can transfer unlimited amounts from existing ISAs, however, the maximum that can be subscribed to an AIM ISA in a given tax year is determined by the ISA allowance at the time – currently £20,000 per individual per tax year.

How has AIM changed over this time?

Having peaked at approximately 1,700 companies at the end of 2007, by the end of July 2013, the number of companies had fallen to 1,086, with a total market value of £64.2 billion and an average market value of each AIM company of just over £59m. Despite the steep fall in the number of companies, thankfully there was a big improvement in quality.

AIM’s largest company in 2013, valued at £3.9 billion, was online fast fashion pioneer ASOS, which has recently moved to the main UK stock market. Only six AIM companies were valued at more than £1 billion, four of which were from the oil and gas sector.

New admissions offer glimpse of risk and rewards of AIM

July 2013 saw 15 new admissions to AIM, whose progress offers a glimpse of the risks and rewards on offer to those investing in AIM companies.

The new admissions in July 2013 included Conviviality Retail (Market cap on admission £87m), Frontier Developments (£48m), Keywords Studios (£59m) and Plus500 (£137m).

Conviviality, a wholesaler and distributor of alcohol, fell into administration at the end of March 2018, less than 5 years since joining AIM, after a series of disastrous acquisitions and profit warnings. Earlier in the year and well before its final demise, our associated research site Investor’s Champion highlighted concerns with Conviviality in this article here ‘Conviviality – plenty of red flags to concern shareholders!’. Led by an over ambitious CEO, whose remuneration structure was poorly aligned with outside shareholders, unfortunately it was just the sort of failure we came across all too frequently in the earlier days of AIM.

Thankfully things have improved considerably on AIM since then and it has also been far better news for shareholders in several of the other new arrivals from July 2013.

While shares in Frontier Developments have fallen back sharply over recent months, by April 2021 this video game developer carried a valuation of over £1 billion.

Keywords Studios, a service provider to the video game sector, has adopted a very successful buy and build strategy and is currently valued at £1.2 billion with the shares up over 1000 per cent since admission.

Plus500, which provides online trading services in contracts for difference, share dealing and options, moved from AIM to the main UK stock market in 2015. It is currently valued at £1.2 billion, with the shares also up over 1000 per cent since admission to AIM. Plus500 has also rewarded shareholders with some very large dividend payments along the way, many times the AIM admission price.

What about AIM in 2023?

Fast forward 10 years and the total market value at the end of July 2023 of AIM’s now 790 companies was £83 billion, an average of £105m per company which is close to double the average value in 2013.

Eleven AIM companies were valued at more than £1 billion with leisure travel group Jet2 the largest at £2.4 billion. Ten years ago, Jet2, which was then called Dart Group, was valued at only £350m.

It’s notable that there are currently no oil and gas companies among AIM’s £1 billion+ brigade, with Greencoat Renewables, an investor in renewable energy infrastructure assets, currently the largest energy company on AIM.

Another key attraction of AIM for IHT planning

A reflection of AIM’s heightened appeal to a broader investor base is perhaps best reflected in the growth in the daily value of shares being traded on AIM.

Back in 2013 the average daily value of shares traded on AIM was £156m per day. By 2021 the average daily value had more than doubled to £395m and even in the current market, where more elevated interest rates have and recessionary fears have seen trading volumes decline materially across the AIM and small cap universe, the average daily value in 2023 to date has still been £217m.

This liquidity is also another key attraction of investing in AIM for IHT planning purposes, the ability to access capital at short notice, should cash be needed.

What about the performance of the AIM market?

The last 10 years has seen the AIM Index deliver its usual roller coaster ride, soaring over the course of the pandemic and reaching all-time highs by the end of August 2021, only to fall back precipitously and currently sit only 6% higher than where it started on 5 August 2013.

As has always been the case, AIM remains a stock pickers market with the index offering a poor guide of the true potential to outperform and Fundamental Asset Management’s AIM IHT portfolio and AIM IHT ISA has significantly out-performed the AIM Index since inception.

You can find out more about AIM ISAs here: ‘AIM ISA Explained’.

Our recent Blog here considered how valuations on AIM are the most attractive we have seen. We also covered the valuations topic in depth in our recent webinar AIM: A Half Year Update.

In this third episode of The Fundamental Asset Podcast, Chris Boxall, co-founder of Fundamental Asset Management, covers three UK small cap stocks which have recently issued positive updates.

Castings (CGS), with squeaky clean reporting and a nice dividend, Kooth’s (KOO) big contract win in the United States and Kitwave’s (KITW) consistent delivery, in more ways than one! In a difficult market for small caps these are some shining lights.

In contrast at the other end of the scale, Chris discusses Marlowe (MRL) and Gooch & Housego (GHH) and their acquisition strategies. The Fundamental team has been doing some deep research into Marlowe (MRL) and Chris shares some of those insights in this conversation.

You can listen to the podcast from the link here (Note: this links you to the Fund Your Retirement site)

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

Fundamental now offers its standard AIM IHT Growth Portfolio, as well as its new AIM IHT Income Portfolio service.

Webinar: AIM a Half Year Update

Join Fundamental Asset Management Co-Founders Chris Boxall & Stephen Drabwell on Tuesday 18th July at 3pm as they look at “AIM a Half Year Update”. The webinar is CPD eligible.

Your seat can be reserved for “AIM a Half Year Update” by going to the quick registration page here. This will also allow you to watch the webinar on demand after the event.

You can find out more about Fundamental Asset Management’s AIM portfolio service from the link here or by contacting [email protected] or calling 01923 713894

In this second episode of The Fundamental Asset Podcast, Chris Boxall, co-founder of Fundamental Asset Management, discusses three UK micro-cap stocks to keep a close eye on.

All three companies are growing but do have areas of concern which are holding their share prices back.

Chris also shares some red flags to look for when analysing companies.

Key topics for the second episode:

The latest Inheritance Tax news.
Companies: Anexo (ANX), Time Finance (TIME), PCI-PAL (PCIP), Character Group (CCT) and Volvere (VLE).
Red flags for investors to look out for.
Big contracts for small companies – can they execute and deliver?
Significance of senior management remuneration for smaller companies.

You can listen to the podcast from the link here (Note: this links you to the Fund Your Retirement site)

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

Fundamental now offers its standard AIM IHT Growth Portfolio, as well as its new AIM IHT Income Portfolio service.

Webinar: AIM IHT – Do’s, Don’ts & Maybes
Join Fundamental Asset Management: Co-Founders Chris Boxall & Stephen Drabwell as well as special guest Town Close Financial Planning: Managing Director Jeremy Askew on Wednesday 14th June at 3pm as they look at using AIM for Inheritance Tax planning; advantages, disadvantages, alternatives and costs. They will also cover the new Consumer Duty.

Your seat can be reserved for ‘Using AIM IHT – Do’s, Don’ts & Maybes‘ by going to the quick registration page here. This will also allow you to watch the webinar on demand after the event.

You can find out more about Fundamental Asset Management’s AIM portfolio service from the link here or by contacting [email protected] or calling 01923 713894

INHERITANCE TAX RECEIPTS UP

HMRC data released this morning show Inheritance Tax (IHT) receipts reached £600 million in April 2023, which is £100 million higher compared to the previous tax year’s April figures.

Commenting on the rise, Jonathan Bramall, Business Development Manager at Fundamental Asset Management said:

“Due to years of increasing house prices, high inflation rates, and tax freezes, more families who do not consider themselves wealthy are now exceeding the threshold for IHT.”

A large factor in the increase in Tax receipts is down to more people being caught outside of the tax-free inheritance allowance known as the nil-rate band. Each individual can pass on up to £325,000 of their estate without being liable for any IHT. Amounts exceeding £325,000 may be subject to a maximum IHT rate of 40%. Despite inflation reducing the value of this relief by 32.8% since April 2009, and average house prices rising by nearly 85%, the nil-rate band has remained unchanged – meaning more estates are having to pay IHT to HMRC.

An established tactic for individuals concerned about IHT is using AIM listed companies which are eligible for Business Relief to reduce their potential liability. The easiest way to do this is using an AIM specialist firm that specialises in investing in AIM for IHT planning. For more information click here.

STAMP DUTY RECEIPTS DOWN

HMRC did see a fall in Stamp Duty receipts of £0.7bn compared to the same period in 2022. This is due to the property market being hit by a combination of factors including the cost-of-living crisis, the disastrous mini-Budget and Stamp Duty changes.

Fundamental Asset Management’s AIM Inheritance Tax portfolio service can help you leave more of your money to your family instead of HMRC. To find out more about the benefits of AIM, please speak to our Business Development Manager, Jonathan Bramall, via email [email protected] or phone 01923 713 894.

With today’s HMRC announcement that Inheritance Tax (IHT) Receipts are up £1billion to £7.1bn, Fundamental Asset Management give some tips for keeping the money you want to leave your family out of the Chancellor Jeremy Hunt’s hands. Fundamental’s portfolio manager, Chris Boxall explained:

“Using AIM for IHT is the easy, non-contentious way of getting IHT relief on investments on behalf of your estate when you pass away; keeping Jeremy Hunt’s hands (or whoever is the Chancellor at the time) off your money.”

Fundamental Asset Management’s Top Tips:

1)

Do you have old ISAs that are going to form part of your estate upon death? You might wish to transfer these into an AIM IHT Portfolio to save up to 40% of their value through IHT relief. Fundamental Asset Management accept transfers-in of old ISAs.

2)

Consider if “only” using this year’s ISA allowance is going to reduce your IHT liability as much as you want in the long run. You may also want to invest in a non-ISA AIM IHT portfolio to allow your family the opportunity to potentially inherit more of your money when the time comes.

3)

View the investment to be over at least a 5-year period. If you cannot afford to be without this money, it may be that this investment is not right at this time. It also potentially enables you to better see the investment opportunities AIM can deliver.

Remember, for your estate to not pay Inheritance Tax on the investment – a saving of 40% – your investment needs to be in certain AIM shares that qualify for Business Relief. The shares need to:

• Be held for 2 years or more and still held at death; and
• Be held in a company that still qualifies for Business Relief at the time of the investor’s death.

Fundamental Asset Management’s AIM Inheritance Tax portfolio service can help you leave more of your money to your family instead of HMRC. To find out more about the benefits of AIM, please speak to our Business Development Manager, Jonathan Bramall, via email [email protected] or phone 01923 713 894.

For their latest podcast, the investment research and online financial media publisher Fund Your Retirement have interviewed Chris Boxall, co-founder and portfolio manager at Fundamental Asset Management.

In a broad ranging interview, linked below; Chris gives his view on the AIM market, singles out two companies he views as having high growth prospects and looks at how the AIM market has evolved over the last 20+ years.

HOW TO LISTEN TO THE EPISODE
Podcast episode on YouTube
On the Fund Your Retirement website
Spotify
Apple

Fund Your Retirement is an investment research and online financial media publisher. Their goal is to make finance more accessible to everyone by featuring top experts in the finance industry and sharing their knowledge on wealth-building strategies.

To find out more about the benefits of AIM, please speak to our Business Development Manager, Jonathan Bramall, via email [email protected] or phone 01923 713 894.

Inheritance Tax (IHT) receipts were up again April 2022 to February 2023. Compared to the same period in the previous year, there was an increase of £0.9bn with a total of £6.4bn being received. This serves as a timely reminder of the ISA Deadline for clients who wish to deposit new or additional funds with Fundamental Asset Management’s AIM IHT portfolio service.

ISA DEADLINE DATES

Existing clients: 5th April.
New clients: 3rd April at the latest (assuming all information needed has been provided).

With HMRC IHT receipts up again, don’t miss out on this year’s ISA allowance. Whole or part of existing ISAs can be transferred (subject to the existing ISA manager) to potentially reduce IHT further.

Our last webinar AIM ISAs here.

To find out more about the benefits of AIM, please speak to our Business Development Manager, Jonathan Bramall, via email [email protected] or phone 01923 713 894.

When investing in smaller quoted companies and particularly those on AIM, the predominant investor focus is of capital growth, as opposed to dividend income. Indeed, the London Stock Exchange’s description of AIM as being a “Market for small and medium size growth companies” highlights the junior market’s primary purpose.

While our firm would never advocate investing in AIM quoted companies for reliable dividend income, the fall in the share prices of many cash generative AIM companies over the course of 2022, many of which have a long track record of dividend payments, has served to highlight the income potential from AIM, not to mention the modest valuations of many companies previously considered for their growth appeal.

AIM quoted Wynnstay Group, a supplier of agricultural products and services to the UK’s arable and livestock farmers, recently reported fabulous full year results with earnings up 86% and a near 10% increase in its dividend, making it 19 consecutive years of dividend increases since Wynnstay joined AIM in 2004.

Link Group’s AIM Dividend Monitor from September 2022 suggested that the total dividend payout from AIM companies would reach £1.22bn in 2022, which will be close to the record payout of £1.29 billion in 2019. Our assessment suggests that dividend payments in 2022 may actually exceed this level.

The strong rebound in dividend payments and steep decline in share prices in 2022 means that the dividend yields of well-established AIM companies have risen substantially, to levels not seen in the 19 years my firm has been managing AIM portfolios.

Returning to the earlier point of AIM being primarily a market for growth companies, it’s worth emphasising that many of these current AIM high-yielders also have considerable growth attractions.

The founder management of one fast-growing and cash generative AIM company, with an attractive dividend yield, has clearly had enough of AIM’s ‘mispricing’ of their shares, engineering a deal to take the company private, with the help of an enthusiastic private equity backer. They were probably getting fed-up of being considered for their income, rather than growth attractions! Other cash generative AIM companies, may follow suit if their share prices continue to languish.

It’s noticeable that many mature AIM companies with surplus cash have also initiated share buy backs and special dividend payments.

Footwear retailer Shoezone announced an additional special dividend at the time of its full year results, which reported 55% growth in earnings per share. It is also committed to a significant share buyback programme.

The high dividend yields of many AIM companies bely their considerable long-term growth attractions.

Another attraction for many private investors when investing in AIM quoted companies is the potential to save future Inheritance Tax (‘IHT’) – shares of ‘Business Relief qualifying’ AIM companies fall outside the holder’s estate for IHT purposes if held for 2 years or more.

Those investing in AIM for IHT planning purposes for the first time may often be transferring out of income generating funds and equities. The idea of regular dividend income from a portfolio of AIM shares may therefore be appealing.

A word of caution

It is evident that most AIM companies generating strong cash and attractive returns on capital should prioritise re-investment in their business to help drive growth, over and above paying out large dividends to shareholders.

Some AIM companies might not be re-investing enough in their operations, with a risk that trading will ultimately suffer. Worse, having previously paid out large cash dividends, companies are subsequently forced to raise further equity from shareholders in support of acquisitions, at considerable expense and dilution to existing shareholders. In this case, it would surely have been better for the company to have held back its previous generous dividend payments.

There are many aspects to consider when assessing the income appeal of AIM companies, however, just because the dividend yield is high doesn’t mean the company no longer has capital growth attractions as well – it’s possible to find both from AIM’s many excellent companies.

Our recent WEBINAR: What does 2023 have in store for AIM? also covered the income attractions of AIM. You can watch the webinar from the link here.

To find out more about the Income benefits of AIM, please speak to our Business Development Manager, Jonathan Bramall, via email [email protected]  or phone 01923 713 894.

Join Fundamental Asset Management’s Co-Founders Chris Boxall & Stephen Drabwell on Tuesday 31st January at 3pm as they look at the risks and opportunities for AIM in 2023.

They will review 2022 and look into their crystal ball for 2023. What happened to AIM in terms of its size and overall performance? The webinar is titled What does 2023 have in store for AIM? This webinar is CPD eligible.

To register your spot and to be able to watch it after the event, please click here.

TOPICS TO BE COVERED:
– Brief introduction to AIM for Inheritance Tax (IHT) planning
– Recap on performance in 2022
– AIM IHT investing universe 2023
– Company valuations
– Results and updates January 2023
– Growth or Income AIM IHT portfolios?

For more information about reducing Inheritance Tax using Business Relief (also known as Business Property Relief) click here.

To find out more about the benefits of investing in AIM shares for IHT planning purposes, please get in touch via email at [email protected] or phone 01923 713 894