Tag: AIM

UK Politics and Stock Market Review

According to a report in the FT, the development of the Jackdaw gas field is not quite as dead as I suggested in a previous blog post, which was based on a decision in the Scottish courts. The FT says:

“The government is currently drawing up new guidance for environmental impact assessments in response to the Finch decision, which will be published in the spring. The guidance is expected to set the bar higher for fossil fuel projects. The energy companies will then have to resubmit environmental impact assessments to the Offshore Petroleum Regulator for Environment and Decommissioning, a quango which answers to Miliband.

But Rachel Reeves said last week that ‘we were really clear in our [election] manifesto that we would honour all existing licences including at Rosebank and Jackdaw and we will stick by those commitments’”.

This is all very well but the companies involved are surely going to have difficulties planning future capital expenditure given the outstanding uncertainty as to whether Labour politicians such as Miliband will stick to their party’s commitments. Foreign companies and investors will surely be scared off by this duplicity and dissimulation.

The UK stock market has been trending down. Is this the post-Christmas hangover or just the trend following caused by index tracking funds? I don’t know as Paul Scott might say. He wrote a very amusing blog post recently putting the boot into an AIM company who shall remain nameless that claims to have a cure for erectile dysfunction. He simply said he had tried it and it did not work. I certainly recommend doing some shopping to try products and services before investing in a company.

Meanwhile, AIM continues to lose companies via de-listing or moves to the Main Market. The ones delisting are generally too small to be on AIM where listing and regulation costs are too high. They should rightly leave.

The ones moving to the Main LSE market (see GlobalData today) do not seem to justify the reputational problem of being on AIM compounded by the recently reduced tax benefits. The AIM market has a major problem and will continue to decline unless it is substantially changed with improved and tighter regulations. A change of name would also help.

The Reform Party is now on a roll and is leading in opinion polls. This may not last as people tend to support minority parties between general elections when their minds get more focussed on reality. But Reform is certainly proving more credible even if not everyone likes Nigel Farage. The Labour Government is even panicking to the extent of cancelling elections in some local councils on the basis that the pending local government elections will mean some votes will be wasted as boundaries are redrawn. They are also gerrymandering by proposing to reduce the voting age and allowing anyone who is UK resident to vote (i.e. not UK citizens alone). These moves are certainly very deplorable to anyone who believes in democracy.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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Inheritance Tax Simplification – Perhaps

On Friday (5th July) the Office of Tax Simplification (OTS) published their second report on the simplification of Inheritance Tax (IHT). You only need to read the report to see how complex it is at present. They have made some recommendations for changes but they are relatively minor. Major changes were ruled out. Even the suggested changes need to be accepted by the Treasury so they may not be implemented, and even if they are it appears likely that they would not happen quickly. These are some of the key proposals:

  • Exemptions for gifts might be simplified. For example, the exemption for “normal expenditure out of income” is unclear in effect and requires detail record keeping for many years which few people are capable of doing. They suggest it be replaced with a higher personal gift allowance. Tip: keep a spreadsheet of all income and expenditure (including gifts) if you are making personal gifts at present.
  • The 7-year period after which gifts are free from IHT also creates problems in record keeping (even bank statements are not retrievable after 6 years), particularly as it can extend to 14 years. Taper relief is another complication. The proposal is to scrap taper relief and have a simple 5-year rule for exemption.
  • The residence nil-rate band introduced a lot of complications in IHT calculations and received a lot of negative comments but they don’t propose to remove or simplify this area as they say it’s still relatively new and more time is required to evaluate its effectiveness. But it says some solicitors choose not to advise clients about this concession because it is so complicated!
  • They propose no change to the provision that reduces the IHT tax rate on all assets to 36% if a person leaves more than 10% of their estate to charity despite the fact that it is little used. Note: this is a very useful facility so if you have a will that does not include such a provision then you need to review it because it can reduce your overall IHT bill.
  • Business property relief, particularly on “unlisted” AIM shares, was considered in the review. It questions whether third party investors in AIM traded shares meet the “policy objective” of Business Property Relief (BPR). But it makes no specific recommendation other than noting that removing APR (Agricultural Property Relief) and BPR would fund a reduction in the main rate of IHT to 33.7% from 40%. However it does point out the anomalies in determining whether a business is trading or is just an investment vehicle and in non-controlling shareholdings held indirectly. It suggests this be reviewed.

Is there a threat to IHT relief on AIM shares? It is not clear that there is and certainly not in any short-term time frame. In any case, investing in AIM shares simply because they offer IHT relief is a bad policy. Investment should never be driven by tax considerations. In addition the requirement to hold them for 2 years makes for dubious trading decisions and the complexity in record keeping if one trades in the shares of AIM companies can be mind-boggling.

In summary the proposed changes, even if HM Treasury supports them, are not going to simplify IHT that much. You will still need to take expert advice on this area of your financial affairs and tax accountants will not be put out of work. There is no revolution proposed.

You can read the OTS report here: https://tinyurl.com/y65jubxz

Or read my original comments on what should have been done here: https://roliscon.blog/2018/05/31/inheritance-tax-review/

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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