Unlike on the main market, Aim dividends come from a much broader mix of sectors (oil accounts for 1 per cent of Aim payouts compared with a fifth on the main market). Dividend payers on Aim are also dominated by UK-focused companies. Let’s not get carried away, though. The average yield on Aim, at 1.2 per cent, is much lower than on the main market, while special dividends make up a larger share of that yield. And some of the biggest companies on Aim have never paid a dividend.
And there’s the matter of the very recent pointed reminders that this kindergarten is not heavily regulated and is still prone to blow-ups. Of the 439 companies that have paid at least one dividend since 2012, around 100 of those are no longer on Aim, according to Link. That group of 100 includes Conviviality, which paid out £22m in dividends in 2017.
This is not to knock Aim as a source of dividends. They are a big positive and confirmation that parts of Aim are thriving. But Aim is and will always be the go-to market for high-risk growth investments and, currently, a bridge to help pass wealth down to the next generation free from inheritance tax. It is only because there are potential rewards on offer – tax relief and high returns – that investors are prepared to take on that risk.
Yet in the Budget on Monday the support of Business Property Relief could be kicked away. One reason for suspecting this is because a detailed review of inheritance tax has been concluded (but not yet published). The scope of the review was to look at how the tax could be simplified. There’s no question IHT could be simplified! But it isn’t going to happen without a quid pro quo for the tax office. So, proposals might include scrapping the residence nil rate band while raising the main IHT threshold. The long list of gift allowances and maze of rules relating to gifts made in the seven years prior to death and into trusts might be swept away. As part of the review, a spotlight would have been shone on relief given to Aim shares with a view perhaps to restricting it to pure start-ups.
Or perhaps the chancellor has eyed up pensions tax relief, the subject of numerous cuts already (and one of the costliest to the Treasury). Pension savers have been expecting the axe to fall on higher rate relief for years and so it might finally be limited to 20 per cent or even rebranded as a government 'bonus'. Annual and lifetime allowances could be shrunk and tapering might kick in at a much lower level. Entrepreneurs’ Relief could also be for the chop – it’s seen by some as overly generous.
Whatever the chancellor taketh this time, let’s hope he bears in mind the point of these reliefs. These are not perks, they are incentives to encourage people to back small domestic growth companies and to build funds for a secure financial future.
