post

The Spring Budget- what does it mean for Inheritance Tax?

The Chancellor of the Exchequer Rishi Sunak recently delivered his spring Budget setting out the Government’s plans for taxation and spending for the upcoming financial year. This contained several important measures aimed at restoring control of public finances gradually and to tackle the ongoing challenges brought about by the coronavirus pandemic.

But what does it mean for Inheritance Tax?

Business Property Relief

Much of this discussion prior to the budget was focussed around the rules on Business Property Relief. Business Property Relief allows an investor to achieve 100% mitigation from Inheritance Tax on Business Property Relief assets held for two years and until death.

Not every business qualifies for Business Property Relief, but shares in a qualifying company listed on AIM, the growth market of the London Stock Exchange, do. We have been successfully managing AIM Inheritance Tax portfolios since 2004, significantly outperferming the AIM Index.

Mr Sunak made no changes to the rules on Business relief which seems in line with his position to support small businesses. Our report available from the link here and below explains more about Business Property Relief.

Personal Tax Thresholds

One area where Rishi did cover Inheritance Tax was in his decision to freeze all personal tax thresholds until 2026, including Capital Gains Tax, Income Tax, Inheritance Tax and the Pensions allowance.

The Inheritance Tax threshold freeze includes both the nil rate band and the residential nil rate band.

These thresholds were expected to rise with inflation as an individual’s income increases, but as this will no longer be the case, more individuals will find themselves with an Inheritance Tax issue on the horizon as they move towards 2026.

One simple and popular Inheritance Tax planning solution remains an AIM Inheritance Tax (‘IHT’) portfolio which will give full IHT mitigation after only two years while also enabling the investor to retain access to funds. An AIM IHT portfolio can also sit within an ISA.

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 16 years, from the link here. We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details.

Join us for our webinar at 2pm on 25th March 2021 where we will be discussing Are AIM tax reliefs at risk? You can register from the link here.


post

What drove AIM’s outstanding performance in 2020…

London’s AIM market had a remarkable 2020, ending the year with its market value at an all-time high and with the AIM Index also significantly outperforming other UK main market indices. But what drove this remarkable performance in such a challenging year?

AIM (formerly known as the Alternative Investment Market) closed 2020 with 819 companies and a total stock market value of £131 billion. While there was a net decline of 44 companies from 2019, the overall market value was £16.9 billion higher. A lot of the strong performance came from companies qualifying for the popular Inheritance Tax planning reliefs.

The AIM index continues to be dominated by relatively few large companies, with AIM’s twenty largest companies valued at £45 billion, representing 34% of the total value of AIM. At the end of the year there were a record 24 AIM companies valued at more than £1 billion each, compared to only 16 at the end of 2019.

With its shares up 42% in 2020, ASOS closed the year as AIM’s largest company, valued at £4.8 billion, having assumed the crown from online fashion rival Boohoo Group, which came in second, valued at £4.35 billion, despite attracting criticism for poor working conditions at its suppliers and questionable corporate governance.

AIM’s Leisure Goods sector was another beneficiary of the pandemic seeing its value soar £3.7 billion to £7 billion, driven by strong trading from video gaming companies, three of which were valued at more than £1billion each at the year end, with Codemasters Group not far behind.

AIM subsequently lost Codemasters as it was acquired by US giant Electronic Arts. It’s a shame to see another fast-growing UK company acquired by an overseas rival, but this is very much the nature of AIM, with UK shareholders seemingly unwilling to back the longer-term growth opportunity. Codemasters was a constituent of our AIM Inheritance Tax portfolios.

Having attracted little attention for many years, many of AIM’s small healthcare companies were quick to develop tests for Covid-19, subsequently benefiting from explosive demand and share price growth.

The value of AIM’s Healthcare related companies, encompassing the sub-sectors of Medical Equipment and Services and Pharmaceuticals and Biotechnology, rose £5 billion in value to £17 billion.

There were big moves from anything involved in Covid-19 testing and vaccine development, with companies in these areas adding £1.6 billion of market value. The Healthcare sector also brought AIM’s top performer in the year in Novacyt, which received large orders from the UK’s Department of Health for its Covid-19 tests, helping to lift the shares over 6000% in the period.

With many countries (and notably Germany) getting behind hydrogen as an alternative to natural gas, there was growing interest in hydrogen-based energy, which is being pushed as a solution to fill the energy gap left from the impending closure of nuclear and coal-fired power stations.

AIM has several hydrogen fuel cell companies, whose shares soared over the course of the year, despite the challenges of the pandemic, adding £5.9 billion in market value to the Alternative Energy sector. Both ITM Power and Ceres Power closed the year valued at more than £2 billion each, with shares of the former up 600%.

AIM’s Technology sector consisting of 113 companies, encompassing the sub sectors of Software, Hardware and Telecommunications related activities, proved extremely resilient with its value rising £4 billion to £18 billion.

Our associates Investor’s Champion provided a review of AIM’s electrifying performance in 2020 in this update here.

AIM’s outperformance relative to the main UK market was driven by the latter having no exposure to video gaming and hydrogen fuel cells, two sectors seeing exceptional share price gains, and relatively little pure exposure to niche software, technology and online retail. The UK main market also continues to suffer from a distinct lack of growth!

The AIM of today consists of a far greater number of good quality businesses, many of which are delivering far more impressive growth than their peers on the main market and are also suitable for AIM Inheritance Tax portfolios.

As individuals own 25.1% of AIM companies, against just 11.3% of FTSE 100 companies, UK private investors will also have benefited very nicely from this outperformance and supported many fast growing UK businesses.

To benefit from the Inheritance Tax planning reliefs, individuals need to own the qualifying AIM shares directly in a segregated portfolio in their own name i.e. the tax benefit cannot be gained through investing via a collective/fund structure. In support of this, a growing number of financial advisors embrace AIM and AIM Inheritance Tax portfolios, which can also be accessed through a number of advisor wrap platforms.

We discuss AIM’s impressive performance in 2020 and potential themes to follow in 2021 in our Webinar here.  

Click the picture below to register for the session.

 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 16 years, from the link here.

We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details.


post

How does AIM Contribute to the UK Economy?

In 2019, AIM companies contributed £33.5 billion to UK GDP, directly supporting more than 430,000 jobs and contributing £3.2 billion in tax revenue. Over the last 5 years the direct economic contribution made by AIM companies has grown by 35% from £24.8 billion while employment has grown by 22%.

In addition to this, direct contribution from AIM companies support further economic activity through both their supply chains and the expenditure of employees in their local economies. Through their supply chain expenditure AIM companies support a further 294,000 jobs and £20.3 billion of GVA. This indirect impact includes a broad range of suppliers to AIM companies such as financial services (nominated advisers and stock-brokers), business services (registrars, financial public relations, legal, tax, accounting and audit) as well as wider goods and services.

Both those employed directly by AIM companies as well as those employees supported through the supply chain will spend their wages on goods and services supplied by UK businesses. These induced effects generate further employment and GVA. The induced impact is estimated to support a further 181,000 jobs and a £13.4 billion GVA contribution to GDP.

Taken together, the overall economic impact is equivalent to £67.2 billion in GVA and over 900,000 jobs.

Improving productivity

AIM companies are, on average, more productive than the national average with productivity of £77,700 GVA per employee compared to £56,387. This is only marginally below the London average of £79,586 – the most productive region in the UK. Over the last 5 years, the productivity of AIM companies has improved by 11% compared to 10% nationally and 9% in London.

Regional spread

Unlike most businesses on the main market, AIM businesses are spread regionally across the UK in terms of their location, workforce and production lines. This helps support the UK government’s strategic goal of improving productivity and prosperity across all regions of the UK and helping balance regional disparities. Regional benefits are clear across areas where productivity is lower such as in the Midlands, Yorkshire and the North East.

Encouraging exports

Exporting plays a vital role to the UK economy by raising additional revenue from overseas. Around 20% of the turnover of UK-incorporated AIM companies comes from overseas, twice as much as their private company comparators. This figure grew significantly from £7 billion in 2010 to £12.4 billion in 2019.

Supporting growth

AIM plays a key role in supporting growth in small and medium sized businesses by allowing them to raise external finance at different stages in their lifecycle. This enables them to raise equity capital supporting their innovation, driving productivity and creating employment. It is this access to appropriate financing options that allows a business to scale and reach their growth potential.

AIM has made a significant contribution to the UK economy and has a critical part to play in supporting the economic recovery and helping to support growth across the UK economy.

(Research Grant Thornton- June 2020)

Join us for our webinar at 2pm on 25th February 2021 where we will be discussing just how valuable AIM is to the UK economy and the opportunities in 2021.

You can register from the link here.

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 16 years, from the link here. We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details.


post

AIM is for growth not just tax relief  

Investing in well-established AIM listed companies has delivered significant outperformance relative to the UK main market, and indeed other international stock markets, over recent years.

The AIM index finished 2020 up 20% for the year, an amazing achievement in the circumstances, significantly outperforming the main UK index of 100 stocks which fell 15%. This represented the biggest one-year differential in AIM’s 26-year history. Our associates Investor’s Champion provided a review of AIM’s electrifying performance in 2020 in this update here.

AIM’s strong performance in 2020 was not just a flash in the pan and over the 5 years to the end of December 2020, the AIM All share index was up 60% whereas the main UK market was up only 11%.

We acknowledge that this excludes dividend income, and the main UK market has yielded over 4% per annum over this period, however, 2020 highlighted the fragility of dividends for highly geared companies on the main UK stock market, many of which were forced to cut or postpone dividend payments.

AIM’s outperformance over the past 5 years is all the more impressive considering the fall in the number of companies on AIM over this period with 816 companies on AIM at the end of January 2021 compared to 982 at the end of 2016. The net result is that the AIM of today consists of a far greater number of good quality businesses, many of which are delivering far more impressive growth than their peers on the main market and are also suitable for AIM Inheritance Tax portfolios.

As individuals own 25.1% of AIM companies, against just 11.3% of FTSE 100 companies, UK private investors will also have benefited very nicely from this outperformance and supported many fast growing UK businesses.

To benefit from the Inheritance Tax planning reliefs, individuals need to own the qualifying AIM shares directly in a segregated portfolio in their own name i.e. the tax benefit cannot be gained through investing via a collective/fund structure.  In support of this, a growing number of financial advisors embrace AIM and AIM Inheritance Tax portfolios, which can also be accessed through a number of advisor wrap platforms.

Inheritance Tax relief is clearly a key attraction for many private investors in AIM, but we urge prospective investors to focus on the investment benefits, which have proven to be even more compelling reasons to invest in AIM over recent years.

The pandemic has had an unprecedented impact on jobs, businesses and livelihoods. As the vaccination program rolls out, attention is beginning to shift towards rebuilding and getting the UK economy back on track.

AIM is one of the most successful growth markets in the world and makes a huge contribution to the UK economy, with research suggesting that AIM companies contribute over £33bn Gross Value Added directly to the UK economy, and just as much indirectly. It is a market for young, dynamic and innovative companies and provides a market-place for them to raise equity capital supporting their innovation, driving productivity and creating employment.

Join us for our webinar at 2pm on 25th February 2021 where we will be discussing just how valuable AIM is to the UK economy and the opportunities in 2021.

You can register from the link here.

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 16 years, from the link here. We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details


post

Use it or lose it!

Individual Savings Accounts (ISAs) were launched in 1999 and have become one of the most popular saving tools for investors at all stages of investing whether saving for a first home or for retirement. 11.2 million adults subscribed to ISAs in 2018-19, up from 10.1 million the year before (Source: HM Revenue & Customs).

So why are so many people interested in ISAs?

There are several benefits of using an ISA allowance.

Subscribers can invest up to £20,000 each year, free from income and capital gains tax on investment growth. In addition to this, ISAs benefit from instant access, which is particularly useful for those who do not want to lock away their savings using other methods such as through a pension. ISAs can be held on platform which allows investors to take advantage of wider investment options. This explains why ISAs are one of the most popular ways for retail investors to benefit from tax-efficient investing.

How can ISAs help my client’s intergenerational tax planning?

The tax year for 2020/2021 will end on 5th April at which point next year’s allowance will apply and any allowance not used from the previous year will be lost.

We have heard from advisers that many clients are reluctant to invest due to uncertainty stemming from the current market environment. The tax incentives for an ISA investor can give an extra level of incentive which goes a long way to reassure clients on whether subscribing into an ISA before this year’s cut off is a sensible decision to make. Furthermore, it is not necessary to invest the ISA subscription immediately and cash can be held on account if clients are reluctant to commit to the stock market at this point.

Investing in rapidly growing companies on AIM

Since 2013 ISAs have been permitted to hold shares in companies listed on AIM.

AIM has developed into one of the most successful growth markets in the world, with the AIM index significantly outperforming the main UK stock market over recent years.

The shares of qualifying AIM companies can also benefit from 100% relief from Inheritance Tax, offering a further tax planning attraction.

Making sure clients are taking advantage of their annual ISA allowances is one of the best methods for a client to protect their legacy in a tax efficient way for the next generation.

Derek McLay

Business Development Manager

Fundamental Asset Management Ltd.

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 16 years, from the link here. We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details.


broadcast

Compounding Wealth on AIM

Listen to the Capital Employed Podcast where for this episode they talk to Chris Boxall from Fundamental Asset Management, and Investors Champion. Chris specialises in investing in small high quality companies listed on London’s AIM stock exchange.

Chris explains why he thinks the AIM stock exchange is a great place to invest. He also talks about two quality compounders he feels, despite the high valuations, have great long term potential – dotDigital Group [DOTD] and Gamma Communications [GAMA].

You can find out more about Fundamental’s AIM portfolio service, including the latest fact sheets, from the link here.

Fundamental Asset Management has delivered exceptional investment returns for more than 16 years.


post

How can my clients benefit from AIM?

AIM has helped many growing small and medium size companies in the UK gain access to public markets and the benefits that this brings to their businesses. AIM also provides a platform for the start-ups and small businesses of today to grow into the large businesses of tomorrow, benefitting the wider UK economy.

Individual investors can also benefit from AIM. A client can shield assets from Inheritance Tax (IHT) if held in AIM shares for two years and until death. But what are some specific scenarios where this might be beneficial to a client?

A client with a large stocks & shares ISA in main market stocks who is looking for IHT protection

Many clients have spent a lifetime building up significant sums in their Individual Savings Accounts (ISAs) where they have benefited from tax-free income and capital growth on those investments. However, an ISA in market shares or funds does not give any IHT protection. Since 2013, it became permissible to hold AIM shares in an ISA. As such, a client can transfer previous year’s ISA allowances into an AIM ISA and receive full IHT protection after two years.

A client looking to leave as much as possible to the next generation without losing control of the assets

Settling assets into trust or gifting assets away means the original owner loses control and cannot draw on them if needed in the future. However, shares in BR-qualifying investments remain in the investor’s name which means that if an unexpected event occurs later in life (such as medical bills or care home fees) the client will have the funds needed to meet any resulting costs.

A client who does not have long left looking for IHT mitigation sooner rather than later

Unfortunately, IHT planning often starts too late and many families can find themselves in a position where they are looking for protection sooner rather than later. It can take up seven years for a gift or asset held within a trust to be classified as being outside the original owner’s estate for IHT purposes. However, a BR qualifying investment can be passed on at death free from inheritance tax, provided it has been held for at least two years and at the time of death.

A client who has sold a business in the last 3 years looking to retain the Business Relief benefit

Where a client has sold a business, the proceeds will form part of their estate for IHT. However, where the business assets qualified for BR and were held for two of the last five years, the client has three years from the sale to reinvest into a BR qualifying asset to retain the benefit without having to hold for another two years.

An attorney under a lasting Power of Attorney looking to plan grantor’s estate for IHT without necessitating Court of Protection approval

An attorney under a lasting Power of Attorney (POA) arrangement will require Court of Protection approval to gift assets or settle them into trust on behalf of the client. This is due to the fact these arrangements remove ownership from the client. An AIM IHT arrangement is a simple purchase of shares in the name of the client and does not require such approval.

A client looking to take advantage of the growth opportunity in AIM

AIM is one of the most successful growth markets in the world. Unlike gifts of cash, or cash held in a trust, companies listed on AIM give investors an opportunity to benefit from the potential capital growth AIM has to offer.

A client who wants IHT protection but does not want to use a trust

Some clients are reluctant to set up trusts due to their complexity and cost as well as the possible requirement to take specialist legal advice and on occasion, medical underwriting. AIM allows for clients to achieve IHT protection over their assets in a straight-forward and simple method.

Derek McLay

Business Development Manager, Fundamental Asset Management Ltd.

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 16 years, from the link here. We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details.


post

AIM on platform.. why wouldn’t you?

Last year’s unwelcome introduction of Covid into our everyday lives saw several trends and behaviours emerge. Family solicitors are seeing a significant increase in requests for will writing. And financial advice is no different, with financial advisers seeing an increase in demand for Inheritance Tax Planning (IHT) solutions.

Historically, IHT solutions had only been available directly with investment managers, with advisors forced to direct assets off their designated wrap platform in order to access these. This can be to the detriment of advisers and their underlying clients, as it makes management and monitoring, among other things, more difficult.

Adviser platforms have now evolved to allow clients to invest in individual stocks, including those listed on AIM, the London Stock Exchange’s smaller companies growth market. Many (but not all) AIM shares qualify for Business Relief, which means that if they are held for two years and until death, the holder of the shares is able to mitigate 100% of their potential IHT bill.

Platforms further evolved to 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.

But what are the benefits?

Costs

Platforms have grown to become the dominant force in asset administration for retail clients and financial advisers in the UK. They are in a formidable position to take advantage of scale in terms of pricing. This is something they do well, allowing clients to benefit from reduced dealing, product, custody and investment costs.

Investments

Investment options for retail clients can often be limited due to the small amounts they are generally looking to invest. However, the growth of platforms has effectively made them the key distribution method for investment managers in the UK. As well as being able to negotiate preferential fees, they can give clients access to investment products they would not normally be able to access by going directly. As a result, clients benefit from a wider pool of investment options at a cheaper price.

Administration

Platforms in their most basic form are a technology which allows a financial adviser to retain and manage assets on behalf of their clients. 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. The platform technology itself allows advisers to take advantage of an advanced reporting system. On top of this, platforms are increasingly evolving to support and integrate adviser back office systems, including client portals. Platforms also facilitate custody which removes an element of risk from an advisor’s business model.

The benefits are clear for clients and advisers. However, platforms are also beneficial for investment managers like Fundamental.

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 (listed on AIM), Transact, Ascentric, Funds Network and CoInvestor.

Enjoy your weekend!

Derek McLay; Business Development Manager; 077437 25659/ [email protected]

Join me and the Fundamental Asset Team at our next adviser webinar where we will be discussing another record-breaking year for AIM and what could be in store for 2021. 

Click the picture below to register for the session.

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 16 years, from the link here.

We also have an Adviser Centre with a wealth of information to support financial advisers including case studies, adviser webinars, guides and contact details.


post

AIM is fast maturing into a grown-up stock market

An article in the Daily Telegraph’s popular Questor column commented on the encouraging evidence of AIM’s centre of gravity tilting away from the ‘get-the-founders-rich-quick outfits’ towards real, well-run businesses with bright prospects.

Telegraph subscribers can read the article here, alternatively, Yahoo! Finance has also kindly provided a free to read version here.

AIM’s fabulous performance in 2020 certainly suggests London’s growth market is indeed a very different proposition to the one we first started investing in for Inheritance Tax planning purposes back in 2004.

AIM ended 2020 with its market value at an all-time high of £131 billion. A record 24 AIM companies were valued at more than £1billion each at the year end and 246 AIM companies were valued at £100m or more, the majority of which were in the £100m – £250m valuation bracket.

After rising 10.1% in December, the AIM index finished 2020 up 20% for the year, an amazing achievement in the circumstances and significantly outperforming the main UK index of 100 stocks in the year, which fell 15%. Specialist research house Equity Development commented how this must be “the biggest one-year differential in AIM’s 26-year history”.

But this was not just a flash in the pan and over the 5 years to the end of December 2020, the AIM All share index has risen 60% whereas the main UK market is up only 11%. We acknowledge that this excludes dividend income, and the main UK market has yielded over 4% per annum over this period. However, as commented on by our associates Investor’s Champion in an article here, 2020 highlighted the fragility of dividends for highly geared companies on the main UK stock market, many of whom have been forced to cut or postpone dividend payments.

As individuals own 25.1% of AIM companies, against just 11.3% of FTSE 100 companies (source: “Ownership of UK shares, UK Government, January 2020”) UK private investors will have benefited very nicely from this outperformance.

It is also worth emphasising that to benefit from the Inheritance Tax planning reliefs, individuals need to own the qualifying AIM shares directly in a segregated portfolio in their own name i.e. the tax benefit cannot be gained through investing via a collective/fund structure. Fundamental Asset Management’s AIM portfolios can also be accessed through a number of adviser wrap platforms.  Our Document Library and Adviser Centre has a wealth of information on investing in AIM Inheritance Tax portfolios.

While it was a poor year for new issues/IPOs, with only 32 new entrants raising £486m, AIM saw a large number of secondary fund raises with a total of £5.27 billion raised, making 2020 the best year for secondary issues since 2010.

Not as illiquid as people think!

The average daily value of AIM shares traded also hit all-time highs at £326m, an increase of £91m per day on 2019. Trading volumes remained strong with c £83 billion of shares traded in the year as a whole compared to c£60 billion in 2019. Those are big numbers (for private investors at least!) and counter the argument that AIM shares are illiquid.

ASOS (LON:ASC) remained the largest company by market capitalisation with a year-end valuation of £4.8bn, ahead of online fashion rival Boohoo Group which was valued at £4.3bn.

Although there has been steep drop in the number of companies on AIM, from a peak of 1,694 in 2007 to only 819 at the end of 2020, the quality of companies is far higher.

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 16 years, from the link here.


broadcast

CoInvestor Virtual Manager Showcase

Listen to our Business Development Manager Derek McLay give an 8 minute pitch on what makes Fundamental Asset Management different at the CoInvestor Manager Showcase on 15th December 2020.

If you would like to find out more about Fundamental’s AIM portfolio service you can contact Derek directly on 07743725659 or [email protected]

Fundamental Asset Management has delivered exceptional investment returns for more than 16 years. You can find our latest factsheets, from the link here.

If you would like to find out more about Fundamental’s AIM portfolio service you can contact Derek directly on 07743725659 or [email protected]

Thank you for watching, The Fundamental Asset Team