In this month’s musings we wanted to delve a little deeper into the costs/benefits of Business Relief (BR) as it pertains to AIM and debunk certain misinformation that has captured headlines. In particular, we question the veracity of the often cited £1.1bn-£1.3bn annual “cost” of AIM BR, which compares to our annual estimates of between £250-400m.
Additionally, if AIM BR was removed investors would simply reallocate to other tax-advantaged schemes, attenuating the extent of any savings. In fact, Charles Hall (head of research at small-cap broker Peel Hunt) has calculated that such a move would actually cost the Exchequer money. Hall estimates a net reduction in tax take of £2.6bn in 2024/5 rising to £3.2bn in 2026/27 with modest IHT gains more than offset by associated second-order tax losses catalysed by the removal of BR from AIM shares.
BR is a valuable and necessary incentive rather than some sort of ‘loophole’ and its impact on AIM has been an unmitigated success since its introduction in 1996. From its founding, with only 10 companies valued at £80m in 1995, today the index has 700 constituents valued at more than £70bn. A recent Grant Thornton report highlighted the contribution AIM companies made to the UK economy in 2023: £70bn Gross Value Added1 contribution to GDP; £5.4bn paid in corporation tax; and helped support over 778,000 jobs.
Economic growth is vital to fund public spending and a key part of that is a properly functioning market able to provide patient growth capital to smaller companies listed on public markets. We believe the facts speak for themselves and will trump any ideological prejudices.
Let’s hope the Chancellor Reeves well alone.
