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Investors call for AIM-traded stock ISA reform to boost economy

Investors call for AIM-traded stock ISA reform to boost economy

Ahead of the closing of the Treasury's consultation on 8 May, AIM investors spoke overwhelmingly in support of changing legislation to allow AIM-traded stocks to be included in stocks and shares ISAs.

The Share Centre's latest research also highlights making AIM investment more tax efficient would increase investor demand, benefiting growing businesses looking to raise funds.

Some 94.2% of AIM investors polled by The Share Centre want the right to include AIM-traded stocks in stocks and shares ISAs.

The current method of investing in certain AIM stocks using an ISA is too complicated for many individual investors. Two in five (40.5%) AIM investors didn't know that under current legislation AIM traded stocks were only available in an ISA if they were dual traded. As a result, not many have been able to take advantage of any tax efficiencies. Just 15.3% of those in support of changing the legislation already held dual traded AIM stocks in their ISA.

The tax benefit and simplification of allowing purely AIM-listed stock into ISA wrappers would attract more investment into the market. Currently nearly a third of AIM investors (31.3%) don't hold a stocks and shares ISA - highlighting the potential for growth among current investors, let alone potential investors. In fact, respondents held an average of 32.3% of their portfolio in AIM stocks, equivalent to £11,562. Therefore the average AIM investor would be able fill their current annual stocks and shares ISA allowance completely with just their AIM stockholding if the regulations are changed.

Changing the regulation will also support investment into small companies, helping the economy. 56% of companies listed on the alternative investment market are worth less than £25million, and the stock market plays a crucial role in small-scale companies raising finance given the lack of business lending. For instance, nearly a quarter of AIM investors (23.2%) already invest the alternative investment market to help support the UK's growing businesses. However, more than a third (36.1%) of investors want the change in legislation to encourage further investment of the UK's growing businesses.

Gavin Oldham, Chief Executive of The Share Centre, said: "The announcement in the Budget to abolish stamp duty on AIM shares as from 2014 is a significant step forwards, but we believe the initiative to allow AIM shares into ISA portfolios can be implemented much sooner than the summer recess. AIM investment is a crucial growth engine for the economy. Allowing stocks and shares ISAs to include AIM investments would not just be popular; it would help small but growing UK companies raise the finance they need to play their part in the economic recovery.

"Changing the regulations would broaden investors' choice if they want to invest tax efficiently in growing firms. To that end, we've written to more than 8000 of our customers to notify them of the consultation, asking for them to send their views to the Treasury, and we hope the government will see sense under the weight of investors' opinion and implement the initiative very quickly now."

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George Bailey