Making the market work for investors

Fashion house Mulberry is on the AIM
Fashion house Mulberry is on the AIM

AIM stands for the alternative investment market and is a sub market of the London Stock Exchange.

It allows smaller companies to float shares within a more flexible regulatory environment than the main market.

Although this market is classed as high risk it does have some companies which have been long established such as Mulberry the handbag people and Nichols who make the Vimto and Panda drinks.

However, there have also been many disasters in the past with oil companies such as Desire Petroleum (which now no longer trades) discovering that the oil they thought they had was in fact water.

But AIM shares can be attractive as they are now eligible for ISA investments, but perhaps more importantly most AIM shares have no inheritance tax liabilities if held for two years.

For people who have an inheritance tax liability and are prepared to take risk this could be for them.

In effect this means they are saving 40 per cent on their estate. But as mentioned earlier they need to be aware of risk and also that not all AIM shares qualify for the inheritance tax relief.

This is known as business property relief and it is difficult to get a definitive list of shares that qualify, but you can invest into an AIM inheritance tax portfolio that is managed professionally that should meet its objectives of qualification.

Also by having a portfolio the risk will be spread and you should have gained diversification through investing into different sectors.

Although I have highlighted the risk involved with AIM shares some companies list on AIM because they are predominantly family companies and the AIM structure suits them.

These companies include Churchill China and James Halstead Ltd with both of them having records stretching back more than 100 years.

Although some of the AIM shares can be described as speculative there are some very steady companies on the exchange, and it is worth considering these shares in particular if you have inheritance tax problems.

However, before committing to these shares it is worth contacting an Independent Financial Adviser to ensure you receive the best advice and are aware of the risks involved.