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End the ISA AIM share ban

Tuesday, Sep 20 2011 by
11

Judging by some earlier threads on the site there would appear to be a great interest in finding AIM-listed companies to put into UK residents' Individual Savings Accounts.

http://www.stockopedia.com/content/dual-listed-stocks-on-aim-34125/?comment=17#17

http://www.stockopedia.com/content/whats-your-isa-aim-share-favourite-for-2011-52430/?comment=24#24

As we know only too well it is only those stocks currently with a dual-listing overseas that are eligible for inclusion in ISAs, legislation which therefore restricts investor choice as well as blocking a source of capital for the country's small businesses. 

Of course, the government will argue that there is still plenty to choose from in the FTSE350, and may well not wish the 'ISA brand' to be tarnished by novice investors who get burned in selecting smallcaps that go to the wall (though these can be useful losses to offset capital gains against!).  However, it is my view that investors should be given more choice to structure their portfolios in any way they see fit, whilst utilising the annual ISA allowance.

An e-petition has been set-up seeking to challenge the existing legislation and can be accessed via the link below - if it gets at least 100,000 signatures, it will be eligible for debate in the House of Commons, so let's hope it starts to snowball as people become aware of it.

http://epetitions.direct.gov.uk/petitions/16111

I hope that if you agree that AIM stocks should be available as ISA investments that you will join with me in signing the petition.

 

SM


Filed Under: Tax, Stock Picks, Regulation, Isa,

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9 Posts on this Thread show/hide all

MadDutch 21st Sep '11 1 of 9
1

I am fed up with the dead hand of the State Nanny telling me what is good for me when I invest.

It is 'elf & safety run riot.

I have signed.

MadDutch

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Soundbuy 21st Sep '11 2 of 9
3

Signing too.

Would like to see rules changed to re cash /share ISAs too.

Possible to change from cash to share ISA. Why not the reverse?

I'm sure there'll come a point at some time in my life where I'd like simply to retire, earn some (healthy) interest rather than monitor a portfolio of stocks. I see no reason not to be able to do this from a tax free wrapper after cashing in my share ISAs.

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extrader 21st Sep '11 3 of 9
4

Hi all,

Horses for courses and all that....

If the price of ISAbilty of AIM shares (which I like in principle : if they're excluded for 'riskiness', I've lost shedloads more money on 'regulated' FTSE-100/250 co's !) is the loss of the exemption from IHT after 2 years' holding, I'm not so sure......

I'm gradually moving my 86 year-old father's porty into AIM shares every time he approaches the IHT threshold.....and will be doing the same for myself ie my heirs (unless things change) in the next decade or so.....

What's the point of figuring out the loopholes that, supposedly, make the UK one of the better 'unknown' tax havens if you then go and change them......;-
ATB

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alterego 23rd Sep '11 4 of 9
4

In reply to extrader, post #3

There are a lot of folk who value the IHT exemption many AIM stocks offer. Will any government be happy to allow CGT and higher rate tax relief as well as IHT exemption in an ISA? I doubt it. I won't be signing the petition - IHT exemption is too valuable.

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StrollingMolby 28th Sep '11 5 of 9

Well, in just one week the epetition has attracted over 500 signatures from just bulletin board channels as far as I know.

If you haven't yet seen the petition it can be reviewed here, and do please add your signature if you agree:

http://epetitions.direct.gov.uk/petitions/16111

SM

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p3dr036 29th Sep '11 6 of 9

It has doubled since I signed up - but realistically there needs to be about 100,000 signatures before HMG will regard it as being worth looking into.

I am writing to my MP about it, urging him to support the move and I suggest that anyone signing up for this e-petition should also
a] get their friends to sign up also and
b] write to their MP

Another point is that AIM has got a bit of a reputation of there being some "dodgy" companies being allowed to list there, including some from Asia, with some Chinese in particular being quried.

Perhaps any extension to AIM shares being allowed in ISAs should be limited either to UK companies or at least EU companies.

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tournesol 29th Sep '11 7 of 9
7

p3dr036

"Perhaps any extension to AIM shares being allowed in ISAs should be limited either to UK companies or at least EU companies"

no, no, no

we don't need nannying

Why on earth should Italian companies be OK but US ones not?

there is no need for regulations to stop investors exercising their own judgement when buying shares - everything that imposes constraints simply makes the regulatory framework more complex and opaque and limits investors' freedom of movement.

Consider the fact that a company which has a primary listing on some obscure, ill regulated exchange in a distant country where there is no effective regulation and where corruption is endemic and a secondary token listing on AIM is currently eligible for inclusion in an ISA despite the highly visible risks to which it is exposed. In contrast an Aim listed company domiciled in the UK and strait-jacketed by our over-weening regulatory/governance/legal framework is not eligible despite the risks being self evidently more manageable.

Nor is it a matter of size. There are small companies listed on the main market (AEX to name but one) which are eligible for ISA's and much larger more stable companies which have stayed on AIM which aren't. It's nonsense.

Our lives are overloaded with unecessary regulation, constraints and bureaucratic nonsense. Other examples which come to mind in this area are:-

1) the prohibition on holding cash balances within ISA's (apart from cash ISA's when it is mandatory) - this makes it more difficult for investors to manage their investments in a rational manner by moving to cash at times when markets are in turmoil. In effect it forces investors to buy shares even if the market conditions are palpably dangerous/unsafe. This is clearly against the interests of investors.

2) the compulsory conversion of pension funds into annuities at an arbitrary age. There is not even a pretence of any justification for this. If you want to manage your own pension fund when you are 74 that's OK. But the state does not want you to do so after your 75th birthday. It does not take the honest and straight forward approach of saying that 75 year olds are mentally incompetent and need their affairs to be managed by an insurance company - that would at least have the benefit of clarity. No, what it does is impose a straitjacket of constraints and raft of obstacles that make life almost impossibly difficult. So at 75 you have a choice, give in to the arbitrary decisions of the politicians and civil servants who drafted stupid, unreasonable and vindictive legislation for no reason other than pandering to their own need to control other people. Or struggle to navigate an extra layer of compexity and convolution. It's simply ridiculous.

What we need is less regulation, less state control, less bureaucracy, less nannying. Just leave people to get on with managing their own affairs as they think fit.

T

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extrader 29th Sep '11 8 of 9

Hi rg,

Agree wholeheartedly !

But , if people were free to run their lives without the interference of politicians, what would be their purpose.....?

So, je regrette mon vieux, it ain't gonna happen ;-
ATB

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Boros10 12th Dec '12 9 of 9
1

I am generally in favour of allowing all AIM stocks to be held in an ISA. I have one major concern though. In recent years we have seen anywhere between 50 and100 AIM companies delist each year. In some cases a tender offer is launched at a significant premium to the prevailing price prior to the annoucement. In other cases a tender offer is launched without any premium or even at a discount to the current price. In yet other cases, no tender offer is made at all.

ISA holders may be faced with a variety of unpalatable choices. If the new rules do not allow ISAs to hold delisted AIM stocks shareholders will have to tender the shares (if this option is offered) or be forced to sell at distressed prices prior to the delisting if there is no tender. If they take no action the delisted stock is likely to be expelled from the ISA, potentially wiping out part of the tax shelter carefully built up over many years from annual contributions, gains and income.

Even if the new rules allow delisted AIM shares to remain in an ISA, many low cost brokers will be reluctant to offer this option. I recently had to set up a full service SIPP with another provider when a very successful AIM company I was invested in chose to delist and I decided to remain on board. My low cost SIPP provider told me it could not hold private company shares because of the additional costs involved. At least, I had the option of transferring the shares in specie and protecting the value of the tax shelter.

I realise the majority of delistings involve companies which have experienced problems and where most of an investors money may already have been lost, so many of the problems identified here may be less important in practice. However, many profitable companies choose to delist due to a lack of trading volume/liquidity, high compliance costs and/or have no plans to raise capital.

One solution for those wishing to hold a delisted AIM stock if it must be removed from an ISA would be to allow the investor to replace its value with a cash contribution thereby protecting the value of the tax shelter. A simplier solution, might be a form of bed and breakfasting where the shares are sold prior to the delisting and immediately bought back outside the ISA.






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