Inheritance Tax Services
Investment in certain companies listed on AIM and PLUS has become increasingly popular due to various tax reliefs available to private individuals. Speirs and Jeffrey can advise on the choice of AIM and PLUS investments for tax purposes.
What is AIM?
AIM (formerly the Alternative Investment Market) is the London Stock Exchange's global market for smaller growing companies from all over the world. AIM enables these businesses to access the capital and liquidity of the London markets.
Companies listed on AIM are currently regarded as being "unquoted" and this has some positive tax consequences for some investors in some companies (see section on tax reliefs below)
The regulatory requirements for companies joining the AIM market are considerably less stringent than for a full listing and corporate governance standards are not mandatory.
What is PLUS?
PLUS is an informal exchange (operated by a company listed on AIM). Listing requirements are even less stringent than for AIM and liquidity in the stocks traded on PLUS may be even more limited.
How Does Investing in AIM and PLUS companies Differ from Investing in Quoted Companies?
Most AIM and PLUS companies are relatively small and some may be newly-established and without a track record. AIM and PLUS companies are not required to make any minimum proportion of their capital available to investors and so the ability to deal in some stocks may be very limited due to an absence of buyers or sellers. This can add to share price volatility. AIM and PLUS companies are not presently required to issue circulars to or otherwise consult shareholders when undertaking reverse takeovers and this can lead to less information being available to shareholders about potentially significant changes in the business. AIM and PLUS companies also have considerable flexibility with regard to the accounting standards they adopt and the currency in which they report.
AIM and PLUS offer considerable flexibility to issuers in order to attract companies which might not otherwise qualify for or be prepared to accept the requirements of a full listing. Investors should, therefore, consider investing in AIM and PLUS companies to be a higher risk exercise than in investing in fully-listed companies.
What tax advantages can an investor in AIM and PLUS stocks enjoy?
The following comments are extremely general in nature and are designed to provide a broad overview of the possible reliefs available.
Investors should consult their professional tax advisers to ensure that they will be eligible for particular reliefs on particular investments and must not rely on the following brief descriptions. The following paragraphs are designed only for individuals who are UK income tax payers.
Inheritance Tax (IHT)
Investments in qualifying AIM and PLUS trading companies can attract 100% relief from IHT provided that the investment is held for at least two years before a chargeable transfer for IHT purposes. For IHT purposes the definition of trading company is less restrictive than for CGT - companies must wholly or mainly be trading companies.
Enterprise Investment Scheme
Investment in new issues of AIM and PLUS trading stocks may be eligible for EIS reliefs but not all AIM or PLUS new issues are eligible. Neither are EIS schemes confined exclusively to AIM or PLUS-listed companies. EIS reliefs are complicated, but in outline, they consist of: income tax relief of 20% of the cost of the shares to be set against the individual's income tax liability for the tax year in which the investment was made (up to a maximum of £400,000 invested); exemption from capital gains tax on disposal; loss relief at an investor's top rate of income tax in the event of loss or failure of the EIS investment; and Capital Gains Tax deferral relief allowing the payment of tax on a capital gain to be deferred where the gain is invested in shares of an EIS qualifying company. We should stress that the rules governing EIS investments are more detailed than outlined above and that investors should consult a tax advisor before making an EIS investment.
WARNING
All listed shares can fluctuate in price but AIM and PLUS share prices may be especially volatile. Furthermore, you should be aware that it may not be possible to buy or sell AIM and PLUS shares within the quoted "spread" due to lack of liquidity in the market. While we have used due care in researching AIM and PLUS stocks which we may recommend to you, the lower level of disclosure required of AIM and PLUS stocks means that there is a greater risk that we may be unaware of or miss a significant fact relevant to the company's future performance. Because of the higher risks and volatility of AIM and PLUS stocks the importance of having a diversified portfolio to reduce the effects of stock-specific risk cannot be overstated. If you are relying on AIM and PLUS investment to deliver tax advantages to you, please be aware that there can be no certainty that current reliefs and allowances will continue indefinitely.