Tax
Wealthy Investors Aim To Avoid UK Inheritance Tax
Holding stock in the Alternative Investment Market provides an escape route from inheritance tax which high net worth individuals are rapidl...
Holding stock in the Alternative Investment Market provides an escape route from inheritance tax which high net worth individuals are rapidly buying into, say experts.
Inheritance tax has been high on the agenda of many people since the recent UK Budget, yet few investors are aware that AIM-listed company stock can be bought up and held for up to two years, exempt from capital gains tax.
“Nobody should do this just for tax purposes. The stocks should always be good investments in their own right,” Norman Yarrow, director, Northern Venture Managers, told WealthBriefing
Mr Yarrow is a full-time stock-picker of AIM-listed firms. His firm, Northern Venture Management, became part of Edinburgh Fund Managers for a stint, and has more recently been working in association with Turcan Connell, Scotland’s largest private client law firm.
To qualify for inheritance tax business property relief, the shares must of course be unquoted, held in a trading company which does not get involved in “excluded” activities like dealing in stocks and shares, and owned for a period of two years prior to their transfer.
Where AIM shares are sold and replaced within a period of three years by other Aim shares, the two periods of ownership can be added together if both lots of shares otherwise meet the conditions for tax relief.
Should an AIM-listed company be taken over by a fully quoted company those shares would no longer qualify for tax relief.
Lifetime gifting can be used to avoid inheritance tax on death, but many face a difficult choice between making lifetime gifts of assets to avoid tax, and retaining those assets to provide income and capital for future needs. This gets around that problem, explained Mr Yarrow.
“There is some volatility with AIM companies but they are not all fledgling and high risk. Some are very well established. In general, AIM is not terribly well understood,” he added.
