The government's decision this week to enable shares listed on AIM to be held in ISAs demonstrates that it’s now happy to ease investor protection in order to meet its desire for SMEs to have sufficient access to funding. It sees AIM investors as a potential source of cash that the banks are still loath to provide. This move comes amid confidence returning to the City and activity picking up.
This move is good news for SMEs who have struggled to source capital over the past few years. This is also good news for investors. It makes AIM shares one of the most tax-advantaged of all investments. In most cases, they are already exempt from inheritance tax. From next year, investors won’t have to pay stamp duty on AIM stocks, and the new rules now add income tax and capital gains tax exemptions to the list of benefits.
AIM has seen its highs and lows. Before the 2008 crash it was thriving as the City was beaming with confidence and large institutions were on the hunt for good opportunities. Hundreds of companies headed to AIM and in 2006 alone, £10bn was raised. When the crash took hold everything came to a grinding halt and the number of companies headed to AIM dropped dramatically. This year companies picked up just £337m of new money, a meager sum in comparison to the pre-crash hey days.
As confidence returns to the City this is good news for the junior market. AIM offers great profit opportunities. As Patrick Connolly from Independent Financial Advisor Chase de Vere says: "These companies are typically more dynamic and have greater growth potential than larger firms, which are often at the consolidation stage of their development. Over most reasonable time periods it is likely that smaller companies will outperform their larger counterparts."
Hopefully AIM will start seeing more success stories such as Majestic Wine and Asos, both of which have richly rewarded investors.
Alistair de Kare-Silver
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