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4th
Jul 2013
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AIM Shares to be allowed in ISAs later this year, Treasury announces

In a turnaround from Chancellor George Osborne's position following the Budget in March, the Treasury today announced that AIM (Alternative Investment Market) shares will included as part of the ISA allowance later in 2013 (date to be confirmed). This is a move that will be welcomed by many investors following the Government's original proposals to implement this, which were made in December last year. The move to allow AIM shares under the ISA umbrella is to form just one part of a raft of measures supporting smaller companies.

AIM - a growth market

AIM (formerly known as the Alternative Investment Market) is the London Stock Exchange's market for smaller, growing companies, and is the most successful growth market in the world, attracting over 3,000 international companies to date. Since AIM's inception in 1995, more than £60 billion in capital fundraising has enabled member companies to fund their development and pursue their growth ambitions.*

The move will end the current disparity between investment ISAs and self-invested personal pensions (SIPPs) regarding AIM shares. Under current rules, investment in AIM shares is permitted within SIPPS, but not within the annual ISA allowance. An end to this difference in treatment between the two investment vehicles is thus likely to be welcomed by many investors.

SMEs could benefit

Prior to today's announcement, the Government has been hesitant to bring AIM shares into the ISA fold, citing their high risk as one reason for this. However, consultation on whether to include AIM shares in ISAs was announced in 2012's Autumn Statement, and the subsequent change of heart appears to be motivated in part by a desire to boost funding for smaller companies. The consultation outcome report summaries that: "This policy could lead to an important capital injection for SME equity markets and encourage more investment in growing businesses. It will also improve choice for ISA investors by widening the range of shares eligible to be held in an ISA."

Commenting on the results of the consultation, Sajid Javid, Economic Secretary to the Treasury, said: "Today's changes to ISA rules will allow SMEs to access another source of funding and follows the Budget announcement to abolish stamp duty on shares traded on growth equity markets. Together these changes will make investing in SMEs more attractive and boost growth."

Around 20m people in the UK hold ISAs, which can be used to invest in a mixture of cash, gilts, bonds, investment trusts, or shares traded on recognised markets. The ISA allowance increased in line with the start of the new tax year on 6th April 2013 which, coupled with the changes to AIM rules, could offer investors even more tax-efficient flexibility.

* Source: The London Stock Exchange 2010(http://www.londonstockexchange.com/companies-and-advisors/aim/publications/documents/a-guide-to-aim.pdf)

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The Tax treatment of ISAs depends on the individual circumstances of each client and may be subject to change in the future.

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