While scrapping the inheritance tax relief on AIM shares would be “unnecessary and painful”, London’s junior market will survive if the change is implemented, the exchange’s chief has said.
“I think it’s really important that we don’t get wound up into a sense of ‘the market is going to fail if business relief is abolished’,” Marcus Stuttard, head of AIM and UK primary markets at the London Stock Exchange Group, said today.
Stuttard also lashed out at a recent report from the Tony Blair Institute and think thank Onward calling for the abolition of AIM, describing it as “nonsense” and not backed up by “any rationale”.
“[The report] completely missed the point that the FCA in 2021 introduced the minimum market cap of £30m to the main market, which represents the current valuation of about 40 to 50 per cent of AIM,” he said.
“We also think that it’s really important as we have done for the last 29 years that we’ve got proper market segmentation,” he added. “One of the big benefits of AIM is the government’s been able to calibrate tax breaks as a market operator, we’ve been able to calibrate the rules.”
Inheritance tax on AIM?
Speaking at the launch of a new report on the poor prospects for smaller companies in the UK from think tank New Financial, Stuttard said that instituting an inheritance tax on AIM shares would cause a “significant slug of capital” to exit the market.
He added that when you compare the performance of the AIM market to the wider FTSE, “you can see the two diverging quite clearly around the time of party conference season last year, when there was talk about inheritance tax”.
“The same has happened over the last three weeks, but to a much greater extent,” he added, as speculation over the introduction of inheritance tax on AIM shares has spread.
While Stuttard said there would be a “legitimate and genuine concern about short-term volatility” if the tax was instituted, he added that the market has begun to price it in without any catastrophic reaction.
He also argued that the market had survived a lot worse in the past, although AIM stocks have continued to dwindle over recent years.
“[AIM] didn’t fail when taper relief was withdrawn. It didn’t fail when retail were pushed out of the market, when the prospectus regime came in,” said Stuttard.
“It would be really unnecessary, it would be painful, and it would be unhelpful, but I have a lot more confidence that we’ve got a much more broader based market than one that’s just reliant on a single tax rate.”