The Treasury has opened up consultation on including shares traded on small and medium sized enterprise equity markets within stocks and shares ISAs.
This is a follow up to the Chancellor’s Autumn statement in 2012 when he said that the government would consult on expanding the list of ISA qualifying investments.
At present a stocks and shares Individual Savings Account can hold:
- Shares and corporate bonds from a recognised stock exchange.
- Units or shares in funds that are FSA authorised.
- Units or shares in FSA authorised non-UCITS retail schemes.
- Shares and securities in investment trusts.
- Units or shares in UCITS funds based elsewhere in the EU.
- Any shares transferred in from an HMRC approved SAYE share option scheme or Share Investment Plan
- Life insurance policies.
- Stake-holder medium term products.
As the Alternative Investment Market (AIM) is not a ‘recognised’ stock exchange you cannot put AIM shares into an ISA unless those particular shares are also being traded on a recognised market elsewhere.
But the Treasury consultation could change all that allowing the placing of the riskier assets from small and up-and-coming companies into your ISA. This might also bring a lot more money into the small and start up company market.
But as the shares increase or decrease in value so does the value of your ISA pot.
So the potential investor would have to be cautious and size up the risks when eyeing what could be a juicy looking reward.
As John Williams, managing partner at Kuber Investments says:
“This is a positive move by the Government to encourage more investment in small businesses. The opportunity for tax efficient investment in the FTSE Aim market has always been available through EIS and VCT, but opening the shares up for investment through the UK’s most popular ISA products will give the market a much needed influx of investment which will not only help bolster the index, but the British economy as a whole.
“Investors need to be wary though, as the Aim is a hugely complex market and has often been described as having a split personality where investors’ fortunes have been made and lost in equal measure. Any DIY investors contemplating moving their ISA investments into this space should do so only after careful consideration. Complex investment such as this should be managed professionally through an adviser.
“Those investors looking to increase their tax efficiency above and beyond the current ISA allowance, should instead consider EIS or VCT investments which will shield their shareholdings from inheritance, income and capital gains tax up to Â£1 million.”