Advisers have been using Aim Isas to help mitigate clients' inheritance tax bills for nearly a decade, but concerns over risk and regulation still remain.
Speaking on the ninth anniversary of the government's decision to allow clients to invest Isa money into Aim stocks, advisers have said the more esoteric Isa has proved useful to some clients.
Evelyn Partners's managing director of corporate affairs Jason Hollands said the company has been using Aim portfolios for some clients as “part of an inheritance tax mitigation strategy".
Investing in qualifying Aim stocks within an Isa has the potential for those assets to be free of IHT after two years.
Aim Isas, which launched on August 5 2013, differ from other forms of IHT planning, as the holder can keep control of their money rather than having to give it away before they die.
Hollands added: "For tax purposes, Aim companies are currently regarded as ‘unquoted’ and therefore most, but not all, Aim shares potentially qualify for business relief on death.
"This is providing they have been held for at least two years and remain eligible for business relief at that time. This means they will be potentially exempt from an investor’s estate for IHT purposes."
Unicorn's Max Ormiston, who co-manages the Unicorn AIM IHT & ISA Portfolio Service, said the business had been investing in Aim since Unicorn was set up in 2000 and has seen that IHT is becoming a "bigger concern for many individuals".
"Investors have been able to hold stocks listed on the Alternative Investment Market (AIM) within a tax-efficient ISA wrapper since 2013, enabling them to gain exposure to some exciting and fast-growing British businesses, whilst also benefiting from a number of attractive tax reliefs."
Such reliefs include:
- Full exemption from capital gains tax
- Full exemption from income tax on profits realised and dividends received,
- The potential for investments to be exempt from IHT, provided they meet some strict qualifying criteria and are held upon death.
He said: "This favourable tax position has helped boost the popularity of holding Aim-listed shares by some high-net worth investors who have exhausted their IHT allowance and would otherwise be considering alternative, and typically expensive, forms of tax planning such as trusts."
Ormiston noted that HM Revenue & Customs collected the highest amount of inheritance tax in history during the 2021/22 tax year and the sums are forecast to rise to £6.3bn by 2023/24.
'Turning point'
The development of managed Aim portfolios means investors can choose Aim stocks to include in their Isa, or pick ready-made portfolios managed by professionals.
Ormiston said his business had been investing in Aim since Unicorn was set up in 2000. He commented: "Since then we have seen the Aim market mature and the introduction of Aim Isas nine years ago was part of that journey."
According to Wealth Club's chief executive Alex Davies (pictured, above), the change to allow Aim Isas nine years ago marked a huge "turning point" for investors for both tax-efficiency and access to a wider range of investments.
