How can investing in AIM shares help to manage inheritance tax (IHT)?

With our families’ future financial wellbeing always in the back of our minds, shares listed on the Alternative Investment Market (AIM) can be a useful way to manage inheritance tax (IHT). As such, an IHT investment portfolio consisting wholly of AIM shares, such as the Inheritance Tax Portfolio Service offered by Canaccord Genuity Wealth Management (CGWM), is one option to consider if you want a legitimate way to manage your IHT.

How do AIM shares help with IHT?

Under current rules, shares in some companies that trade on AIM are treated as 'business property' and eligible for Business Relief (BR) - an HMRC allowable tax benefit. Once you have held AIM shares in one of these companies for two years, they can become potentially exempt from IHT. This compares favourably with the usual rules that apply to gifts and simple trust transfers, when you have to survive for seven years before they fall out of your estate.

What are the issues with AIM shares?

Because AIM shares are small capitalisation stocks, investing exclusively in AIM shares via an IHT portfolio service should be considered a high-risk investment strategy. This means that our IHT portfolio service is available via professional advisers or intermediaries, so that you can discuss your individual financial arrangements before investing.

If you don’t have a professional adviser, we have an expert team of independent Wealth Planners here at Canaccord who would be pleased to help you. They can offer specialist IHT planning advice and have no ties to any provider or products, not even our own. 

How does investing in AIM shares via an IHT portfolio service work?

The IHT advantages to be gained by investing in the Alternative Investment Market (AIM) is why we created the IHT Portfolio Service.

Since then, we have delivered a successful service backed by strong performance and a robust investment process. As specialist IHT portfolio managers we look after more than £600m of client assets both directly and across third party platforms, working with some of the country’s best known independent financial advisers.

To meet our clients' objectives, we have a strict investment criteria. Our managers are supported by a 18-strong smaller company investment committee enabling us to meet and monitor many under researched companies listed on the Alternative Investment Market (AIM). We look for businesses with high quality management, a history of consistent earnings, dividend growth, balance sheet strength, proven cash generation, high barriers to entry, reasonable valuation, strong earnings growth, and owner managers. This has enabled us to build a portfolio that has delivered a strong return since inception.

How has the CGWM IHT Portfolio Service performed? 

The chart below shows the CGWM Inheritance Tax Portfolio Service performance (capital return, gross of fees and charges):

Source: CGWM, Adam & Company, Psigma Investment Management and Bloomberg. Performance from April 2005 to July 2022, gross of fees and charges.

Important information: Past performance is not a reliable indicator of future performance. Performance is shown gross of fees Annual management fee and transaction charges apply.

Speak to one of our AIM shares experts

If you’d like to know more about our  IHT Portfolio Service, please contact Paul Parker on +44 20 7523 4534, email paul.parker@canaccord.com or Natalie Howard on +44 20 7523 4824, email Natalie.Howard@canaccord.com.

Find this information useful? Read more: 

• IHT Portfolio Service for intermediaries
• How does inheritance tax planning work?
• Managing inheritance tax – gifting excess income
• Five top tips to help manage the inheritance tax (IHT) payable on your estate
• Keeping informed about IHT – basic facts about inheritance tax you should know
• How does cash flow modelling work? 
• Why should you invest in small-cap companies?

The tax treatment of all investments depends upon individual circumstances and the levels and bases of taxation may change in the future. Investors should discuss their financial arrangements with their own tax adviser before investing.

The tax treatments set out in this communication are based on our current understanding of UK legislation. It is a broad summary and cannot cover every circumstance and it does not constitute advice.