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Boost for investors as stamp duty on AIM stocks is axed

Lucinda Beeman
Written By:
Lucinda Beeman
Posted:
Updated:
28/04/2014

People who invest in AIM-listed shares will no longer have to pay stamp duty on purchases.

The boost for investors comes less than a year after the government announced AIM shares would be allowed into ISAs.

The removal of stamp duty was first announced by George Osborne during his 2013 Budget and will be implemented under the Finance Bill 2014.

Previously, investors in AIM shares had to pay stamp duty of 0.5 per cent on trades over £1,000, however this tax has been axed from 28 April.

Stuart Welch, chief executive of TD Direct Investing, believes removing stamp duty charges will encourage retail investors to back small, growth companies.

He explains: “Currently the stamp duty paid on an average investment of £2,000 can be as much as – or more than – the commission costs of trading. So the removal of stamp duty for AIM stocks effectively halves the costs to consumers of investing.”

TD Direct has seen a significant increase in interest in AIM stocks in the months following their inclusion into ISA accounts in August 2013 and “expects to see a further increase in them in the coming months as a result of this initiative.”

However, some commentators are not so sure.

Mark Dampier of Hargreaves Lansdown doubts that investors will reap significant rewards from this tax break – particularly when compared to the boon they received with the new ISA inclusion rules.

However, he welcomes any movement on stamp duty more generally.

“If trading costs are going to be lower, that’s a positive for investors. But my bigger question would be: if we can do this with AIM, why not move towards larger markets?”

According to Dampier, reports that naïve investors will flock to the AIM are overstated.

He explains: “As an inexperienced investor you’re more likely to buy a company you’ve heard of and know well.”

He believes that the tax break will raise AIM’s profile, however.

Charles Stanley Direct investment analyst Rob Morgan says investors now considering the AIM market need to be cautious as AIM shares can be “extremely volatile” and are generally under-researched. The exchange also has a reputation for “listing speculative companies”, he says.

Dampier says: “People look at AIM because they’re looking for tomorrow’s winners, but it has a lot of tomorrow’s losers as well.”

Morgan concludes: “A small tax savings should not be a significant driver when selecting shares.”

Below is a list of the top ten AIM trades on the TD Direct Investing platform in March:

 

Top Ten – March 2014 Trades % of total AIM trades
GULF KEYSTONE PETROLEUM LTD 4165 7.96%
QUINDELL PLC 2407 4.60%
XCITE ENERGY LTD 1533 2.93%
BLINKX PLC 1307 2.50%
TOWER RESOURCES 1295 2.47%
BOWLEVEN 907 1.73%
GLOBO PLC 722 1.38%
SOLGOLD PLC 715 1.37%
MONITISE PLC 621 1.19%
BOOHOO.COM PLC 590 1.13%