Your IndustryMar 10 2016

Chancellor George Osborne’s changes affected Aim

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Chancellor George Osborne’s changes affected Aim

Alternative Investment Market investing has been given a bit of a filip over recent years, thanks in part to chancellor George Osborne’s various Budget statements.

Richard Power, head of smaller companies at Octopus, says: “Successive governments have shown support for Aim, and have understood the importance of Aim in providing small-growth companies with a platform to gain access to growth capital.”

Aim investments always had attractive tax benefits - which will be discussed in a later article in this guide - but since 2013 things got a little bit more attractive for investors.

One of the biggest supportive measures was in the 2013 Budget, when Mr Osborne announced Aim stocks could be put into a stocks and shares Isa.

This came into effect on 5 August 2013, and was part of a package of measures which, at the time, the government hoped would not only boost individual saving levels but also provide more growth capital to bolster British businesses.

According to Jeffrey Mushens, technical director of the Tax-Incentivised Savings Association, “the expectation was that this would increase the popularity of Aim shares for the average investor” and, he says, anecdotal evidence suggests this to be the case.

Making Aim shares eligible for inclusion in an Isa has opened up a new tax-wrapped way to buy and hold Aim stock Danny Cox

In the first few months between 5 August 2013 and 30 January 2014, 7 per cent of Hargreaves Lansdown’s 577,000 clients put Aim shares in Isas through its Vantage platform.

Danny Cox, head of communications and chartered financial planner for Hargreaves Lansdown, says: “Making Aim shares eligible for inclusion in an Isa has opened up a new tax-wrapped way to buy and hold Aim stock, with tax reliefs to encourage ownership.”

Jack Rose, business development director for LGBR Capital, explains: “The chancellor opened the door for household names such as Asos, Majestic Wines and Youngs to be held in Isas, which until that point had not been allowed.”

The move was politically astute, given the levels of money put into Isas in recent years, and given the government’s oft-stated intention to get more people saving, and investing into British businesses and enterprises.

As Annabel Brodie-Smith, communications director for the Association of Investment Companies, says: “Isas are one of the most popular ways of investing due to their tax benefits.”

During the tax year 2014 to 2015, Britons subscribed to 13m adult Isa accounts, to the tune of £79bn - a significant increase of more than £20bn on the 2013 to 2014 tax year.

According to figures from HM Revenue & Customs, the 2014 to 2015 market value of adult Isa holdings stood at £483bn, split almost equally between cash Isas and stocks & shares Isas.

View from the HMRC

HMRC has outlined the changes to Isa qualifying investments in its August 2013 Isa Bulletin. It clarifies the rules around using an Isa to invest in company shares listed on Recognised Stock Exchanges in the European Economic Area (including Aim).

The Bulletin explains how this would work if investors sell any investments that already qualify for the tax-efficient vehicles such as enterprise investment schemes (EIS), venture capital trusts (VCTs) and inheritance tax business property relief (BPR).

It should be noted that if an investor already holds company shares, which are traded on a newly qualifying market such as Aim, and these already qualify for investment in an EIS or VCT and qualify for BPR, these cannot simply be moved into an Isa.

Mr Osborne’s Isa announcement was followed by another tax boost in April 2014, when he abolished stamp duty on the transfer of shares in Aim companies - a move described by Chris Hutchinson, manager of the Unicorn Aim Venture Capital Trust, as “a major positive initiative introduced by the chancellor”.

Clive Garston, consultant for City law firm DAC Beachcroft, says: “This has undoubtedly helped to make investment in Aim more attractive, which is I assume the reason why Mr Osborne did this.”

Until then, stamp duty was 0.5 per cent on each trade.

Richard Hallett, director at Hargreave Hale and manager of the firm’s Aim inheritance tax service, sums it up: “The chancellor has done a lot to make Aim more attractive over the last few years, by offering additional tax incentives to invest.

“Removing the purchases of Aim shares from stamp duty has lowered the cost of ownership.”