Following recent changes in the taxation benefits of ISAs and Inheritance Tax, we wanted to expand on certain AIM shares which benefit from Business Property Relief or BPR and can now be held within an ISA account. Qualifying AIM shares benefit from BRP once they have been held by an investor for a minimum of two years, after this period they are exempt from inheritance tax. This mean for investors holding these shares in their ISA account for the two-year qualifying period should benefit from virtually no taxes while they hold the share, and no potential inheritance tax liability, which is currently charged at 40%.
Please remember the value of tax shelters will depend on individual circumstances, and tax rules can change over time.
Following the introduction of new ISA rules many investors are now looking to transfer their AIM shares into an ISA account, typically using a Bed & ISA service. The good news is that this doesn’t affect the qualifying period so, for example, if you transfer AIM shares you have already held for two years this inheritance tax benefit will be retained within the ISA, without them needing to be held for a further two years.
So which AIM stocks qualify?
There is no definitive list of which AIM stocks qualify for business property relief. This is largely because the qualification status of a company or businesses can change over time. The latest HMRC guidance is available at http://www.hmrc.gov.uk/cto/customerguide/page16.htm.
Please bear in mind AIM stocks typically involve taking greater investment risk, make sure you understand all the consequences. We always recommend you seek professional advice. Your portfolio could fall in value and be worth less than your originally invested.