In the current economic climate, investors have found themselves in a dilemma: Should they risk losing their money if the market slumps again or stay out of the markets and risk missing an opportunity? The AIM, like most other markets around the world has recently seen a dip in its share prices. For many this has reinforced the belief that AIM companies are too small and volatile and therefore too great a risk. Is the mass exodus of investors really warranted, or should investors with a greater appetite see it as an opportunity to invest? To encourage growth in smaller businesses, the government has gone to great lengths to make investing in these companies an attractive option. There are currently a number of tax benefits available for investments in unquoted companies (for the purposes of these tax reliefs, companies quoted on the AIM and PLUS markets count as unquoted). With tax relief on inheritance tax, income tax and capital gains tax available and the existence of Enterprise investment schemes, entrepreneurs’ relief and Venture capital trusts, perhaps now is the time to consider investing in AIM listed companies.
WHAT IS AIM?
The Alternative Investment Market or AIM is a sub-market of the London Stock Exchange. AIM is home to over 1,200 companies which operate in over 40 different sectors. There are relatively few restrictions on which companies can become listed on the AIM. According to the London Stock Exchange’s website; “AIM is the most successful growth market in the world. Since its launch in 1995, over 3,000 companies from across the globe have chosen to join AIM. Powering the companies of tomorrow, AIM continues to help smaller and growing companies raise the capital they need for expansion.” There are a number of reasons for the AIM markets success, such as:
• The AIM has a more balanced approach to regulation which facilitates a smooth transition into becoming a public company which allows companies to remain focused on growth.
• The AIM employs a large number of Advisors who are experienced in supporting companies from the moment they consider joining and throughout their time in the market.
• An international customer base willing to provide capital to less established companies as they grow.
AIMs regulatory environment has been designed with smaller and growing companies in mind, to help these companies make the most of their floatation. The entry criteria for AIM are more relaxed than on the main markets and more in tune with the needs of smaller growth companies. There is no trading record required, no minimum size criteria and no prescribed level of shares that must be in public hands. To be admitted to the AIM companies are required to have a Nominated Advisor at all times. AIM employs a “comply or explain” model of regulation. This means that companies can either comply with their rules or explain why they will not or cannot comply. There are a number of reasons that companies decide to float on a public market:
• To provide access to capital growth
• To create a market for company shares
• To broaden its shareholder base
• To place an objective market value on the company’s business
• To encourage employees by making share schemes more attractive
• To increase the company’s ability to make acquisitions by using quoted shares as currency
• To increase the public profile of the company
• To enhance the company’s status with customers and suppliers
TAX BENEFITS
There are a variety of ways of investing in AIM listed companies and a collection of tax benefits for doing so. These tax reliefs have a variety of qualification criteria and many are very complex. Depending on your circumstances, you could receive income tax relief of up to £150,000, 100% inheritance tax relief and a number of opportunities for Capital Gains Tax relief. If you are interested in receiving these benefits we strongly advise that you consult a financial advisor to ensure that any investment you are planning on making would be eligible. These tax reliefs are set by HMRC and are subject to change. Talk to a financial advisor for a complete and up-to-date list of tax benefits.
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