Relief in Relief
Amid the plethora of announcements in the Budget, bringing to an end months of conjecture, it was encouraging to see a more moderate approach than feared to changes in Business property relief on AIM holdings. At present, 100 per cent of the value of an AIM portfolio is exempt from inheritance tax under BPR rules. Qualifying AIM shares will continue to benefit from IHT relief, but from 6 April 2026 at the reduced rate of 50% – an effective IHT rate of 20%.
As managers of an AIM portfolio service, it was helpful to see this reflected in sharp rises in many quality stocks, reversing the losses of last month.
But it does highlight the need for even greater due diligence on positions held, as with tax benefits reduced, investors will need greater visibility on measured returns. AIM will have to compete harder for the allocation of cash.
The AIM market has been under significant pressure for a number of years; from the loss of UK Pension Fund allocations, to increased regulation, and a general nervousness towards UK Small cap stocks. On top of these headwinds, the number of bids, US listings, or companies taken private again has dramatically increased. We have seen this in our portfolio, suffering the loss of some very high quality companies.
As the FT noted, the AIM index has lost half its value between late 2021 and late 2023. Tentative signs of recovery in early 2024 were offset by Labour’s victory and fears over significant tax changes. We hope this week’s announcement will see some sustained relief in both share price behaviour and commitment to a market place that embodies much of the aspirations in supporting small companies, industries and management who can be more dominant influence in the future of innovation, employment and capital allocation.
We apply the same process small cap as we do large cap positions, a focus on debt free, cash generative companies, effective allocators of capital with committed management. While everyone knows about Fevertree, we have found some exceptional opportunities ranging from Renew (specialist engineering services), Cake Box (egg free cake franchise), Craneware (solutions for the hospital and health systems), to Ashtead Technologies ( sub sea equipment rental) and Avingtrans (services to energy, medical and industrial sectors).
We continue to scour the market, believe AIM fits well in broader portfolio construction and can find sufficient exciting opportunities to construct a really differentiated portfolio.
If you would like to receive The Daily Update to your inbox, please email markets@epicip.com or click the link below.