Ready, AIM, Fire!
What is the Alternative Investment Market?
Investing in stocks and shares that are listed on major indices, such as the FTSE100®, carries risk and the opportunity of growth over the medium to long term. It is regarded as a mainstream investment that is carried out by individuals, professional investors and pension funds, to name but a few.
The Alternative Investment Market (AIM) invests in companies that are not included in the main dealing platforms and they are generally smaller companies or start-ups. They might not have the same track record as a ‘blue chip’ company that most of the population are familiar with. The risk of failure can be greater than a mainstream investment, but then so could the returns. This is not an area for the inexperienced investor but there are some attractions.
Wealth Generators
The government recognise that investors in this arena can be effective wealth generators (which in turn provides revenue for the exchequer!). On that basis legislation has been created to encourage investment in these companies, using tax breaks to encourage engagement.
As an example, when Inheritance Tax planning, gifts to trusts and individuals may take seven years to be excluded from an estate. However, an investment using AIM investments could reduce that time scale to 2 years, which could be a valuable tactic in some circumstances.
Furthermore, if tax has to be paid when raising capital for such an investment, such as Capital Gains Tax (CGT) on shares or a property, it may be possible to claim back a range of taxes, including income tax and CGT (based on a formula applied to the amount invested).
There have been examples of investments being made using just 70% of the investor’s own funds with the rest coming from the tax man. In addition, it has the potential to save IHT and become an asset in its own right.
As indicated earlier, these investments do carry more potential risk and will not be appropriate for everyone.
For financial planning advice on investments and estate planning, seek out an Independent Financial Adviser, with a good record of delivering simple financial advice that works.
Eamonn Dorling Dip PFS, Senior Independent Financial Adviser, Brooks Wealth Management