Smaller companies are to be allowed better access to the ISA savings pool, the Treasury has announced, thanks to a final decision that will allow ordinary Individual Savings Accounts to access AIM-listed companies. The rule change should be in force by the autumn.
The Treasury’s move, which follows some two years of consultations, marks an important change of sentiment for the Alternative Investment Market regime, which was originally introduced in the 1990s as a way of steering unsophisticated investors toward equity involvement. But until now, the only way that an ordinary ISA holder could access an AIM listed stock was if it also happened to be listed on another main market in another country.
The Treasury says that around 1,000 AIM-listed stocks should be accessible to equity ISA investors when the rule change comes in. Around £190 billion of the £395 billion worth of current ISA funds is currently in stocks and shares ISAs, so the potential for a boost to funding to AIM companies may be considerable.
Some advisers have noted that there seems to be an opening for inheritance tax relief here. Some AIM shares already qualify for Business Property Relief once they’ve been held for two years, and the decision to allow ISAs into them could provide the double benefit of tax-free investment combined with IHT exemption – if they’re held until death, of course.
But not everybody is convinced that the change will be all that noticeable. Some commentators have noted that the majority of equity ISAs are in fact invested in funds rather than individual companies. And IFAs will need to be particularly cautious about the wisdom of directing clients toward what is an undeniably riskier type of investment.
