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BUDGET REACTION: Aim investors could face IHT crackdown

Individuals looking to avoid inheritance tax through investing in Aim-listed shares could be caught by a potential shift in the listing rules indicated in yesterday’s Budget, warns Standard Life.

Budget Note 37 reveals the Government could change the definition of the term “listed” for tax purposes, if the legislation is acted on following the Finance Act 2007.

Aim could come under the same rules as the London Stock Exchange as both become deemed “recognised investment exchanges” for tax purposes.

This means Aim shares, currently exempt of IHT after two years, will fall within the same rules as quoted shares – where a controlling shareholding of 20 per cent is required in order to benefit from the IHT exemption.

Standard Life estate planning specialist Julie Hutchison says: “Many fund managers have marketed their Aim portfolios off the back of this IHT rule. If investors pull their assets out of the smaller companies as a result of this change, it could be really damaging for Aim-listed companies. This is an empowering note that although not a negative change could potentially be used with negative impact.”

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The tax and NI benefits are considerable for group life schemes that meet the relevant conditions to be treated as excepted.

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Christine Hallett, managing director of Pointon York Sipp Solutions, explains the taxation intricacies of holding unquoted shares in a Sipp.

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