Since Aim shares were allowed in Isas in August 2013, Investors Chronicle readers have been asking us where they can find the definitive list to IHT-exempt companies. Investors acknowledge the potentially higher risk of investing in Aim companies, which tend to be smaller and less well established than companies listed on the main market. However, they say an IHT saving of 40 per cent would compensate quite a bit for less than stellar share performance. Nevertheless, it could ultimately prove to be a very costly mistake if an investment is made for inheritance tax planning purposes in an Aim company that doesn't qualify.
The problem is that there is no definitive list of Aim companies that qualify for business property relief - the key that unlocks IHT exemption. Paul Parker, the investment director at Canaccord Genuity Wealth Management, who specialises in managing Aim IHT portfolios says: "The Inland Revenue can't tell you if a company qualifies until you die. However, it is possible to produce a list of stocks that you think might qualify."
If you want an IHT portfolio professionally managed for you then you'll need to invest £50,000 minimum and be prepared to pay up to 2 per cent in fees.
Investors who are prepared to do the work themselves might feel daunted. Mr Parker says: "There are 1,100 companies on the Aim market today. It's not a small market. However, there are plenty of companies that have been around for 100 years and have moved to Aim for the tax benefits because their extended family owns the shares. Unfortunately, all companies on Aim get tarred with the same brush. But they are not necessarily high risk."
One idea, is to simply telephone a company that you are considering investing in. They may say: "We believe we qualify".
Alternatively, investors can now benefit from a new service that aims to help investors identify potentially IHT exempt companies for a small fixed fee on an ad-hoc basis.
Investors Champion (aimsearch.investorschampion.com) researches the Aim market to seek to establish not only which companies qualify for relief for IHT planning purposes, but also which companies partially qualify and where further ambiguity lies. Its research is based on the business property relief rules laid down by HMRC.
To access the full search results and discover which Aim companies might benefit from 100 per cent relief from inheritance tax, investors buy credits on the Investors Champion Aim search site. Searches cost £5 for single company search and fall to £2 per company search for a batch of up to 50 searches.
Founder of Investors Champion Chris Boxall, who also manages Fundamental Asset Management's IHT planning portfolio service says: "While this tool is in no sense definitive, it is a useful tool to narrow down companies, an investment in which may qualify. This preliminary search facility is not intended as a substitute for detailed independent advice on specific investment situations, which should be obtained before any action is taken. It is important to note that an investment in a relevant company that qualifies for IHT relief at the time the investment is made must still be a company that qualifies for relief at the time the investor dies in order for that investment to qualify for IHT relief."
Six Aim-traded companies that are IHT exempt*
James Halstead (JHD)
Nichols (NICL)
Young & Co's Brewery (YNGA)
Goals Soccer Centres (GOAL)
Majestic Wine (MJW)
Telford Homes (TEF)
Source: Investors Chronicle. All six companies are held in Canaccord Genuity's IHT portfolio and are also identified as qualifying by Investors Champion.
