The Alternative Investment Market (AIM) offers investors with significant opportunities for growth – but alongside this comes a need for a significant capacity for loss. AIM is not considered a ‘recognised stock exchange’ for the purposes of government schemes such as Business Relief, EIS and VCTs, so it can provide an attractive area for tax efficient investment.

According to MICAP, as of June 2019 there were 33 open AIM offers available, of which all but two were for Business Relief (BR) products, while those remaining were both for EIS products.

In recent years, VCT has been by far the most popular product to be launched. Since November 2016 there have been 12 VCT products launched, with the remaining five in that period being BR products. All of the offers launched in the 12 months to June 2019 were VCT offers, but all closed before June 2019.

That means all of the currently open offers – mostly BR with two EIS – are historical, having been launched over a year ago, which suggests VCT managers still see a use for AIM albeit for a short window of opportunity for investors (which is not unusual for VCTs). 

Meanwhile, there has been a break in the launching of new EIS and BR offers, both of which tend to stay open longer.

Of the 61 AIM focused tax-advantaged offers ever launched, 34 have been BR offers, 22 VCT offers and just 5 EIS offers. Given that EIS and VCT have broadly the same rules in terms of qualifying companies, it may be surprising to see the disparity between the number of products available for the two.

However, part of the answer to this could be that, as VCTs are listed vehicles themselves, they are more comfortable with quoted companies. Marcus Stuttard, Head of UK Primary Markets & AIM at London Stock Exchange, has referenced this, saying that VCTs act as ”important crossover and cornerstone investors”. He added that companies will often raise VCT finance ahead of an IPO, with the investment putting them on a good footing to make the jump onto AIM.

Meanwhile, the lack of BR offers launched since December 2017 may again be down to the uncertainty over IHT following the OTS review – although Stuttard underlined that the report does acknowledge the government’s commitment to protecting the important role that BR plays in supporting growth investment in AIM.

This piece has been published as part of the AIM Report 2019. For the full report go here