AIM - & Capital Gains

System
System Posts: 100,534 🤖 Admin 🤖
edited 12:08PM in AAT member discussion
My father in-law announced last night that if he bought shares in companies listed on the AIM (not LSE) then he wouldn't have to pay capital gains tax if he traded in them.
This is a new one on me!!
Can anyone confirm / deny ?

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:AIM - & Capital Gains

    There are different rules for AIM investments as it is basically a "division" of the London Stock Exchange and as such tax treatments for different sorts of tax can take a different approach. It is worth noting, however, that this is an area of capital gain tax which can get very messy if not handled appropriately.

    Basically, the tax benefits obtained by investing in the AIM is that the investment qualifies for business property relief - though to qualify for BPR the investment has to be made in a "qualifying" company. Those that qualify essentially carry on a trade, so for example, financial services companies, investment companies and certain others are excluded.

    So, if your father-in law invests in a qualifying company business asset taper relief is available to him when disposing of the shares. This effectively reduces the rate of cap. gains tax to only 20% for AIM investments held for a period of one year and to only 10% for those investments held for a period of 2 or more years.

    So, basically, your father-in-law isn't strictly correct in saying he avoids CGT altogether. Disposing of any shares is within the remit of CGT whether it's on an AIM listed company or ABS Ltd down the road - so you need to make your father-in-law aware of the importance to make good planning when disposing of the shares. It is an idea that when investing in the AIM market proper research is done to identify suitable companies and more crucially, qualifying companies. It is advisable that investments are done through an investment manager specialising in this area. The investment managers should put a portfolio of shares together for your father-in law.

    Sorry for the long-winded post - the above is just a very small scratch on a very large surface - it isn't as clear cut as "I avoid CGT altogether!"

    Best regards
    Steve

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