Proactive Investors - Keeping the IHT tax break would lift one of the biggest clouds overhanging the AIM market, according to one leading commentator.
Colin Wright, accountant UHY Hacker Young’s chairman, said: “Speculation about the future of tax relief on AIM shares is very unhelpful for the market.
“Now that interest rates are finally falling that should help AIM.
“We hope the new Government will make it clear that they are not planning to subject AIM shares to IHT.
“That would lift a big cloud from the UK’s biggest growth company stock market.”
For a lot of fast-growing companies, the IHT exemption of listing on AIM has been its key advantage, he said.
The IHT exemption attached to AIM shares was introduced to encourage private companies (which benefit from the same tax break) to list on AIM and scale up – rather than stay private.
Without the IHT relief attached to investing in AIM shares the market could face greater competition from private equity, UHY Hacker Young believes.
"Share prices of AIM companies would fall due to lower demand and liquidity," added the accountant at a time when higher interest rates had already undermined investor interest in small-cap shares.
New data from the firm highlighted the sharp fall in money raised through secondary funding as well as new listings over the past year.
Secondary fundraisings raised just £1.18 billion in the year to September 2024 compared to £1.8 billion a year ago and £6bn in the peak period of 2021.
New issues or IPOs meanwhile dropped to just eight, down from 12 last year, said the accountant or the lowest since the financial crash of 2008/9.
In terms of new money raised, AIM IPOS have raised £88.6m so far this year or just 1% of the £8.83bn raised during AIM’s 2006/07 peak and down from twelve last year.
The steep drop in AIM IPOs highlights the challenging environment for smaller companies looking to raise capital, it said.
At end of August, there were 704 AIM-listed companies down by 7% from 753 at the end of 2023 and by 58% from its peak of 1,694 companies at the end of 2007.