Member News
By Lord Lee of Trafford - 27th January 2010
Lord Lee of Trafford writes for ePolitix.com ahead of his question on allowing shares listed on the Alternative Investment Market to be eligible for ISAs.
Few, I suggest, would disagree with the call by the Quoted Companies Alliance for the government to set up a working group to design an appropriate structure for equity markets which includes a coherent tax regime.
The confusing rules for Entrepreneurs' Relief (previously Capital Gains Taper Relief), ISAs, SIPPs, VCTs, and EIS – not forgetting inheritance tax, have developed over the years on a seemingly ad hoc basis without any obvious overarching logic or strategy. Let us hope the coming general election will provide a new administration with the opportunity to look afresh at the whole area of tax reliefs, entrepreneurial incentives, savings and equity investment.
My specific question focuses on the illogicality of excluding AIM stocks – shares quoted on the Alternative Investment Market – from eligibility for inclusion in ISAs. In years past, when AIM stocks were almost totally of a start-up, higher-risk nature, and carried with them the dual advantages of being free of inheritance tax and paying only 10 per cent CGT – provided the qualifying shares had been held for two years – there may well have been reason to exclude them from inclusion in ISAs, formerly PEPs.
However, now that the CGT advantage has fallen away and the range of AIM stocks has broadened to include many old-established companies which have voted to move from the main market to AIM, there is hardly an argument to exclude AIM stocks from ISA eligibility – particularly as we now have nearly 150 AIM-quoted companies capitalised at over £100m.
Surely the time has come to allow savers/investors to invest in AIM stocks through their ISA – thus making their own decisions. Surely the government should be trying to encourage investment in predominantly smaller companies – many still embryonic – rather than making it more difficult by ISA exclusion?
There is an additional, irritating, administrative aspect to the current exclusion which I have experienced: on a number of occasions companies that I had invested in, and held in my ISA, have opted to move from the main market to AIM, thus becoming ineligible for ISAs. One then has to 'sell' out of an ISA – either actually selling or, if one desires to retain the holding, finding the cash to buy them back within a non-ISA portfolio – a very messy business.
Making AIM stocks eligible for ISAs would be a start in rationalising equity investment, and also give a welcome boost to the AIM market.
Dods Parliamentary Communications Ltd