The nature of investing in AIM for Inheritance Tax planning purposes is that investors must directly hold shares in the underlying AIM companies, albeit via a broker’s nominee arrangement. The Inheritance Tax planning benefits would be lost should investment be made via a fund or investment trust arrangement where the investor simply holds shares or units in the underlying fund or investment trust.

This method of direct investment has the advantage that the investor has full knowledge of exactly which stocks he or she is holding and how each is performing. This contrasts with the typical fund arrangement where normally only the largest holdings (typically the top ten) are disclosed by the fund manager.

The portfolio approach means investors are also privy to all the transaction details and therefore have full knowledge of the manager’s actions.

The suspension of the Woodford Equity Income fund, where 300,000 investors have been prevented from accessing their cash since June, has highlighted the problems with investment in open ended funds, where fund managers, administrators, custodian’s and regulators sit between investors and their money. Furthermore, investors have little knowledge of managers trading activity and the complete picture of where performance is really coming from. Indeed, the opaque nature of fund investment appears at odds with the information age in which we live and the demand for greater transparency.

While a portfolio approach is a requirement for investment in AIM for Inheritance Tax planning purposes it can equally apply to general investment portfolios. Fundamental Asset Management’s general investment portfolios, supported by our in-depth research and a good dose of common sense, have delivered excellent performance over the past few years, benefitting from exposure to some terrific companies, both in the UK and overseas. Our clients have enjoyed success with the likes of Apple, Games Workshop, Microsoft and Nestle, to name a few.

With trading costs a fraction of what they used to be and portfolios free of the additional burden of administrators fees and other excessive costs carried by funds, it’s a great time for portfolio investors.

We would argue that it’s also far more enjoyable and reassuring to have full knowledge of one’s investments and to experience the thrill of some terrific stock selections and of course the disappointment of the occasional mistake!

To find out more about our high performing portfolios call Chris or Stephen on 01923 713890

Investing in the shares of qualifying AIM companies can attract 100% relief from inheritance tax and is a proven tax planning method, avoiding the costs associated with a trust, or the risks associated with gifts. It’s also been a rather good investment strategy to follow, as long as you know what you are doing!

Fundamental Asset Management’s AIM portfolios can also be accessed through many leading adviser wrap platforms, including Transact, Standard Life Elevate and Nucleus, making it a viable tax planning solution for advisers who don’t want the adminstrative burden of administering assets on multiple platforms.

Supported by extensive in-house research and due diligence, we have successfully managed AIM portfolios for Inheritance Tax planning purposes since 2004, delivering outstanding growth, well ahead of mainstream funds and stock market indices. We have also helped families save large amounts of Inheritance Tax in the process.

However, it hasn’t all been plain sailing and over this period we have experienced everything that AIM has to offer, from the highs of AB Dynamics, whose shares have risen over 2500% since listing six years ago, to the lows of Patisserie Holdings, a café chain worth £400m which succumbed to a massive fraud and disappeared overnight.

We have seen it all, from the boom times of 2007, when AIM had nearly 1700 companies, to the depths of the financial crisis, which saw many investors abandon AIM entirely.

Come and join us on 2nd October 2019 at the Landmark Hotel, London (www.landmarklondon.co.uk) to find out what investing in AIM for Inheritance Tax planning purposes is really all about.

Numbers are limited so please RSVP by emailing [email protected] to reserve your place at this FREE event.
Alternatively, please call 01923 713890.

Venue: Landmark Hotel. 222 Marylebone Rd, Marylebone, London NW1 6JQ

The latest news that leading UK based crowdfunding platform Seedrs raised a further £4.5m in a new funding round has highlighted the appeal of rapidly growing, early stage companies to UK investors, at least relative to the duller offerings on the UK stock market.

However, while there is no doubting the growth appeal of early stage businesses, we struggle to understand the high valuations many of these are achieving on the crowdfunding platforms when raising new money. In many cases money is being raised based on a mere idea, rather than a viable business. We fear this investing bubble will ultimately see small private investors lose out significantly, not simply through business failures, but as these cash consuming start-ups are subsequently forced to raise money at far more modest valuations.

A prime example of the valuation folly on crowd funding sites was recently illustrated by WeSwap, the online peer-to-peer travel money platform.

Back in November 2018 WeSwap was meeting prospective investors with a view to listing on AIM but failed to attract interest at the desired valuation. Admittedly it wasn’t a great time to list with stock markets going through one of their periodic sell-offs, nevertheless, the proposed valuation of more than £40m for a loss making business in a highly competitive arena looked crazy to us.

In 2018, WeSwap generated modest revenues of just over £1.5m with losses over £2.5m. As of June 2019, it had over 500,000 users who had exchanged more than £255m.

Fast forward 7 months and WeSwap raised a further £2.5m on Seedrs at a pre-money valuation of an eye-popping £41.6m.

Comparison can be made to AIM listed Ramsdens (LON:RFX), the diversified, financial services provider and retailer, which has its own thriving foreign currency exchange business.

For its last financial year ending March 2019 Ramsdens grew revenue 17% to £46.8m and underlying profit before tax was up 4% to £6.7m. Its foreign currency business alone served 705,000 customers, exchanging £496m of currency and generating gross ‘profit’ of £11.6m. It also rewarded shareholders with an appetising dividend of 7.2p per share, equating to a yield of 3.7% at the current share price.

We acknowledge that Ramsdens may not be growing as rapidly as WeSwap, however, unlike WeSwap it is demonstrating an ability to grow while generating profits and cash.

Many investors seem fixated that online offerings like WeSwap represent the only route to investment success. Yet the success of many online businesses is dependent on spending huge sums on marketing, much of it swelling the coffers of Google and Facebook. Contrastingly, while a High Street based business like Ramsdens addresses a much smaller potential customer base from its individual sites, its multi-faceted offering, of which foreign currency is just one element, is a beneficiary of falling rental costs.

Backers of crowd funded businesses will ultimately require an exit and a stock market listing, notably AIM, is one such route for this. Yet UK stock market investors seem very reluctant to overpay for loss-making, early stage businesses, addressing relatively small markets. It’s very different in the US, where the market is so much larger and the potential rewards thereby much greater.

While valuation concerns persist with many AIM companies, they look relative bargains compared to their peers on crowdfunding sites. Furthermore, as Sterling is set to languish over Brexit we expect to see overseas buyers keeping a close eye on modestly valued UK listed companies.

August saw our AIM portfolio holding Sanderson Group (LON:SND) snapped-up by a US based acquirer and we expect to see more over opportunistic moves of this type over the coming months.

If you are interested in benefiting from our expertise investing in AIM and smaller quoted companies, please speak Chris or Stephen on 01923 713890 or email [email protected].

The Office of Tax Simplification (‘OTS’) published its long-awaited review on reforming Inheritance Tax. A first report released in November 2018 dealt with the administration of estates while the latest report focuses on how Inheritance Tax could be made “easier to understand and more intuitive and simpler to operate”.

The stand-out headlines in the latest report were recommendations to reduce the seven year rule for gifting assets to five years and to increase the lifetime gift allowance from the current £3,000 to something more meaningful.

The press has also been keen to jump on a mention in the report of Business Property Relief (‘BPR’) and whether the treatment of AIM shares is within the policy intent of BPR.

Paragraph 5.19 of the report states:
…in relation to third party investors in AIM traded shares, BPR is not necessary to prevent the business from being broken up or sold in order to fund the payment of Inheritance Tax. This raises a question about whether it is within the policy intent of BPR to extend the relief to such shares, in particular where they are no longer held by the family or individuals originally owning the business.

Firstly, it should be emphasised that this was only an ‘observation’ and no further reference was made to AIM in the report in the conclusions or recommendations. However, in our opinion the report makes a reasonable observation regarding AIM.

BPR has never been wholly relevant to AIM in terms of preventing a business from being broken up or sold in order to fund the payment of Inheritance Tax. The relief in respect of smaller listed growth companies, is surely in place to attract third party investment and there are indications that the Treasury has always considered it thus. This is backed up by paragraph 5.18 of the report which states:

The OTS notes that the government’s response to the Patient Capital Review consultation published in November 2017 stated the government’s commitment to protecting the important role that BPR plays in supporting family owned businesses and growth investment in AIM and other growth markets. In correspondence and meetings, the OTS has heard evidence of its importance in meeting that objective.

To reiterate, contrary to what has been suggested by some of the more sensationalist headlines in the mainstream press, the OTS report has not recommended the removal of BPR on AIM. 

However, the OTS report has recommended that estates should not benefit from Capital Gains Tax dying with the deceased if the same assets in the estate are also benefitting from an IHT relief or exemption. In this regard Recommendation 5 on page 44 states:

Where a relief or exemption from Inheritance Tax applies, the government should consider removing the capital gains uplift and instead provide that the recipient is treated as acquiring the assets at the historic base cost of the person who has died.

The Treasury has said it will respond to the report in due course and consider its recommendations.

Last year’s Patient Capital Review highlighted a huge gap in funding in the UK for smaller growth companies and the removal of BPR on AIM will only exacerbate this, therefore we remain cautiously optimistic that radical changes are unlikely.

I think it’s worth reflecting that AIM as a viable Inheritance Tax planning option would not exist at all if the investment credentials didn’t stack-up in the first place.

Our AIM for Inheritance Tax portfolios have materially outperformed leading stock market indices for many years due to the compelling growth characteristics of the companies in which we invest, which just so happen to be accompanied by an attractive tax benefit for UK shareholders.

Successful AIM companies like RWS Holdings, AB Dynamics and many others have not seen their share prices rise due to the weight of demand from those investing for IHT planning purposes, they have risen based on the performance of the underlying businesses.

The great benefit of AIM is that it is market where share registers are dominated by family, founders and senior management.

Studies from Credit Suisse, Boston Consulting Group and Bain & Company have highlighted how superior growth and returns have been a feature of family and insider-controlled companies.

The great risk with a tax change of the type feared is if it pushes executive founders to sell early and exit the business, thereby depriving it of a valuable asset. For example, both RWS Holdings and AB Dynamics have benefited from the ongoing involvement of founder shareholders; Andrew Brode, Exec Chairman of RWS, has not sold a share since the business listed on AIM in 2003.

You can find out more about our high performing AIM portfolio service from the link here

Chris Boxall, co-founder of AIM specialist Fundamental Asset Management, writes in this week’s Investors Chronicle.

The article ‘The key to Aim success’ suggests how the AIM Admission Document should be essential reading for any investor in AIM companies, yet large parts of this vital document are often ignored.

The disastrous performance of Conviviality (CVR) and Accrol Group Holdings (ACRL), suggest many investors – both large and small – missed the warning signs in the admission documents of both these companies that may have prevented a substantial loss of capital.

Subscribers to Investors Chronicle can read the article by visiting the link here

Be wary of Buy and Build!
We are increasingly wary of the so-called ‘Buy and Build’ strategies adopted by some companies on AIM, led by corporate managers with little real equity participation; Conviviality being one such example of this. Many of these businesses seem to address low growth markets and are struggling to make real progress, flattering their reported returns through large ongoing exceptional items and restructuring costs, with signs of trouble often reflected in poor cash flow. To quote Warren Buffett, ‘Only when the tide goes out do you discover who’s been swimming naked.’ On this measure Conviviality could be likened to a nudist colony!

The improving quality of companies on AIM, combined with the Individual Savings Account (ISA) rule changes from August 2013 which allowed AIM shares to be held within ISAs, has seen a growing number of investors consider AIM for both its investment and tax planning attractions. The ability to invest in inheritance tax (IHT) qualifying portfolios through many leading wrap platforms now makes it even easier for clients and advisers.

AIM continues to be a market for small, relatively early stage businesses but is also attracting a growing number of more mature, highly profitable, family or founder controlled companies.

There were only 1,000 companies on AIM at the end of September 2016 which is down from 1,044 at the end of 2015 (December or September?). Despite the declining numbers of companies the overall market capitalisation of AIM continued to surge higher to £82.98bn at the month end, compared with £80.57bn at the end of August and only £73bn at the end of 2015.

AIM is no longer the high-risk market of former times, where speculative resource stocks and unknown international companies proliferated. It is now home to a large number of well-managed, profitable, dividend yielding UK based business.

As the market has improved it has also become much easier for investors to buy and sell AIM shares and for advisers to offer access to these exciting companies to their clients, many of which come with attractive inheritance tax planning benefits.

Prudently managed, AIM for IHT planning portfolios have delivered outstanding investment returns over the past few years, significantly outperforming leading UK indices. To end September 2016, the standard Fundamental AIM IHT Portfolio has risen over 100% over five years.

The purchase and sale of AIM quoted securities often used to be the preserve of specialist brokers but Fundamental AIM IHT Portfolios can now be accessed through leading wrap platforms. This means that, in allocating money to a specialist manager, advisers aren’t forced to direct money off platform, which can cause unnecessary monitoring and administrative burdens, not to mention a fear of the unknown.

Advisers can keep everything in one place maintaining the same pricing structure.

Investing via platforms can also expedite investment without the need to complete lots of paperwork, which is particularly important for AIM for inheritance tax planning purposes with the short, two year, qualifying period a key attraction.

Fundamental AIM IHT Portfolios can currently be accessed on the Transact, Elevate and Nucleus platforms.

To find out how you can access these compelling investment and tax planning solutions please contact Stephen Drabwell on 01923 713892 or email [email protected]

The latest investment fund offering from a company called Source, whose web site prattles on about something called Smart Beta, only serves to highlight to us the growing disconnect between investors and their investments. An investment maxim, followed by most of the great investors, was to always ‘invest in what you know’. Unfortunately, in today’s jargon filled investment arena most private investors probably haven’t a clue what they have actually invested in, given the growing prevalence of some bizarre Exchange Traded Funds (‘ETFs’), Structured Products etc. Wouldn’t it be better for investors to have a better understanding of what they were investing in and connect once again with their investments?

Source is yet another provider of ETFs whose product range includes a vast number of collective investment schemes following a diverse number of passive strategies, across sectors, regions, indices, commodities, currencies etc. So rather than invest in something the average person could mildly understand, like a ‘well-known’ index, they invest in baskets of stocks, bonds, or good knows what, largely around some newly created passive index of their own making.

We are all for index investing, which was originally intended to mean passive funds based on leading stock market indices, but, in creating an ever growing number of index based strategies, the financial services industry has managed to complicate a previously simple concept; now that’s a change!

• Do private client managers outperform?

While many funds are criticised for underperforming the benchmark indices, we believe that many private client portfolios investing in direct equities with much broader investment mandates consistently outperform. Furthermore, with a full knowledge of every stock they hold, clients know exactly how their performance has been achieved.

Direct investment in equities and bonds means private investors have a full understanding of what they are holding. The ease of investing globally also means that private investors can easily build a nicely balance portfolio that isn’t geographically constrained.

• AIM for IHT planning offers plenty of attractions for the private investor

Investing in AIM quoted companies for inheritance tax planning purposes necessitates investors holding the shares directly and not via a fund vehicle. This way investors get to know all of their holdings rather than the top 10 holdings of some bland fund, which is usually the case.

It therefore seems foolish for private investors (of more mature years in particular), to gain exposure to this exciting and high performing investment arena via investment funds. In adopting a fund approach private investors would fail to benefit from the attractive inheritance tax breaks that are only available via direct investment. The less liquid nature of small and micro-cap companies also means that funds have much greater difficulty buying and selling in this arena. Investors would also miss out on being better connected with some enticing high growth companies, some of which could be the blue chips of the future!

We advocate investing in what you know and there are plenty of terrific little companies on AIM to know more about!