Aiming for Tax Efficiency

Various methods are employed by people looking to minimise their tax liabilities, while HMRC are coming down hard on many of these it is by no means a crime to make tax efficient investments and take full advantage of the allowances made by the Government.

Unquoted shares, including those listed on the alternative investment market (AIM), are not included as part of your estate for inheritance tax purposes, as long as they have been owned for at least two years and the company is not solely an investment vehicle. In certain situations AIM stocks also incur a lower rate of capital gains tax.

More than 3000 companies from all over the world have joined the alternative investment market since it launched in 1995, it is currently rated as one of the most successful growth markets in the world.

AIM shares, owned for at lea qualify for 100 per cent business property relief from inheritance tax, so can be useful in planning and avoiding giving away assets, particularly for those who worry they may not survive the seven years required for gifts to become exempt.

Investors should realise that AIM stocks carry a higher level of risk, which is the reason for these favourable tax incentives, buying individual shares in AIM listed companies, the majority of which are start-ups, is best done under the supervision of a professional or experienced investor.

Investing in smaller companies can lead to quick returns, because these companies are typically quicker to act on opportunities than their larger counterparts. However, when the markets suffer the small companies are usually the first to lose out.

In spite of the risks several AIM listings made it onto the top 20 purchased stocks last year and their strong growth prospects and tax efficiency continue to prove popular with investors..

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