One way to mitigate IHT is to invest in stocks listed on AIM (formerly the Alternative Investment Market), whose companies can benefit from business property relief. If you buy AIM stocks that qualify for business property relief and remain invested for at least two years, then your capital qualifies for 100 percent relief from IHT. If the AIM shares are listed on any HMRC recognised stock exchange, they will not qualify for the 100 percent relief, so it is important to obtain specialist advice before making the investment, to ensure the relevant shares are only listed on AIM. You can switch between AIM stocks, without returning to the start of the two-year process. If you sell your AIM holdings, however, then the money is deemed to have returned to cash and becomes subject to IHT again. For beneficiaries to avoid paying IHT on your AIM portfolio, therefore, it needs to be held until you die.
Around two-thirds of AIM stocks qualify for this relief. Investments do require careful review and monitoring, however, to ensure they continue to qualify for business property relief. As with VCT and EIS investments, AIM stocks can potentially be higher risk than FTSE All Share companies. Fund managers argue that not only does the 40 percent IHT relief provide a buffer against capital losses, but the risk profile of AIM portfolios can vary significantly. There are sizeable companies on AIM that can make portfolios more defensive. Furthermore, portfolios enable you to spread risk across sectors and companies.
AIM portfolios have greater flexibility than some other tax efficient investments. While VCT and EIS investments are also free of IHT after being held for two years, they can only invest in companies within prescribed parameters
Business property relief is also available on private companies. But these must be deemed to be trading companies by HM Revenue and Customs and not acting as a holding company for your investments.
The PAM Directory is a comprehensive guide on comparative data focusing on asset managers, investment managers, private banks, stockbrokers, wealth managers and multi-family offices, who provide discretionary and/or advisory portfolio management services for private clients.
Order Now
Subscribe to PAM to hear about the latest news and promotions
Site Content Copyright PAM Insight Ltd 2016
This option is not available when logged in as a Private Asset Manager.
For registering with PAMonline. You should now receive an email asking you to verify your email address. If you do not receive this email, please call +44 (0)207 967 1601 for assistance.
To reset your password please enter code below.
To restore your password please enter your email below.
To see full information of the Private Asset Managers, plus the opportunity to rate and follow, login or register
For registering with PAMonline.
You should now receive an email asking you to verify your email address.
If you do not receive this email, please call +44 (0)207 967 1601 for assistance.
To return to the Home page, click here
To see full information of the Private Asset Managers,
plus the opportunity to rate and follow, login or register.
Please fill in all the fields.
To activate your account enter valid activation code below.
To resend activation email type in your registered email address below. Or contact the PAM office on +44 (0)20 7967 1608 to get instructions to activate your account.