Alternative Investment Market (AIM) can be a tax perk for IHT

Making full use of the various opportunities to give money away is one available option to reduce your inheritance tax bill. Another way to take money out of your estate is to invest in small companies.

Investing in smaller companies listed on a special part of the stock exchange called the Alternative Investment Market (AIM) can be a tax perk for IHT. Shares in the companies must be held for two years to qualify for the tax relief, however the companies must also meet certain criteria to gain the exemption. Not all of the AIM stocks do.

Companies on the AIM get the exemption because of the rules surrounding Business Property Relief with the government wanting to encourage investment in small and growing trading businesses. However there is no definitive list on which companies qualify, it is a judgement made by the taxman when the tax is due.

Investing this way does come with a couple of warnings though. Investing on AIM can be riskier, the companies are small and regulation is lighter. It is possible that future legislation will stop IHT relief on AIM shares as they become more mainstream (they can now be used in ISA’s). This means if it happens later in life you may not have time to do 7 year planning instead.

Investing purely for a tax break is a dangerous path, but faced with a large IHT bill when you already stand to lose 40% of your taxable estate, you may be more than happy to take the risk than to give the money to the taxman.

Please email us for help and advice before taking any steps to mitigate your IHT problem.