1st July 2013
New Isa rules will allow direct Isa investment in small and medium sized firms listed on the Alternative Investment Market (AiM). The Treasury announced the move on the Government website this week. The new rules should improve the choice for investors and broker Hargreaves Lansdown says the rule change should allow up to 1,000 AiM stock to be held in stocks and shares ISAs.
The firm suggests it paves the way for the inheritance tax (IHT) free ISA. The qualifying AiM stocks benefit from Business Property Relief (BPR) which provides an IHT exemption once held for 2 years. Investors holding these stocks in their ISA for the 2 year qualifying period should benefit from virtually no lifetime taxes, and no inheritance taxes either says the firm.
Danny Cox, head of financial planning at Hargreaves Lansdown warns that AiM shares can be very volatile and smaller companies are generally higher risk than the so called blue chips, therefore investors should be aware of the risks. Investors should choose stocks or funds which are suitable for their investment approach and objectives and not just for the tax benefits.
It would only be the value of the stock which qualifies which would be IHT free after two years.
Generally AiM companies which are involved in property development or investment business do not qualify for business property relief.
Cox adds: “The alternative to investing in AiM is to go for a fund which invests in smaller companies such as Marlborough Micro Cap or Cazenove UK Smaller Companies fund. These can be held in ISA but would not qualify for an IHT exemption.”