David O’Hara of Blackthorn Focus, has posted the following e-petition on the Government’s website:
The ban on AIM-listed shares being held within a self-select ISA deprives Britain’s small and medium enterprises of a substantial source of capital – the private investor. The ban complicates the management of investments (e.g. when companies move from the Main Market to AIM) and denies the public a tax efficient wrapper for smallcap investments – a vital part of a diversified portfolio. The ban is also an unwelcome complication the ISA investment rules. Private investors are a considerable source of capital and liquidity to the UK’s smaller listed companies. The ISA ban on AIM shares forces private investors to direct their money elsewhere at a time when the UK’s small and medium-sized companies have been identified as key players in the economic recovery. End the ban.
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It’s a fair point, but is there a reason for it? I wonder what it is…..Also I would imagine holding in AIM stocks in an ISA is something of a minority sport? Perhaps most investors get exposure to these sorts of firms through other incentivised schemes and VCTs, given the annual limits on ISAs.
It’s part of the great paternalist game of sheltering the ‘man on the street’ from risk. Plenty of regulators seem to think that only the wealthy (under the euphemism of ‘sophisticated investors’) should be exposed to risk. And to these regulators, AIM is a synonym for high risk. In their view, allowing investors to put AIM stocks in ISAs might taint the ISA brand if people are exposed to losses. Obviously this is a dumb argument: you can lose just as much money on FTSE stocks. The net result is pain for small investors like me, who have to have a separate trading account for AIM stocks, with another schedule of fees, and a bias against equity finance for smaller firms, who cannot be as easily invested in as their larger peers.
A colleague suggested that ISA eligibility for AIM stocks would be in some ways a double benefit, as they already qualify as Business Assets and are thus IHT exempt if held for more than two years.
I replied that the IHT exemption is great for those who have an reasonable actuarial chance of dying in between 2 years after purchase and whenever they sell the stock (you need to hold them for 2 years to get the Business Asset exemption). Many people, especially younger people, are not in that category. It would be nice to think that younger investors of modest means could get a very limited tax benefit from taking a risk on the future of UK plc without needing to die in order to realise their gain.
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