Finance Bill – AIM ‘tax trap’ warning

The government has hinted that the level for tax relief on high-risk investments on AIM could be raised to #30m.

Financial secretary Helen Liddell promised to keep the liquidity of the Alternative Investment Market (AIM) under review after coming under pressure from Conservative MPs in the Commons.

She told the finance bill committee there was not time for concrete proposals before the bill became law, but promised her review would be conducted in the medium term and in a ‘coherent and sensible’ manner. Liddell announced the potential climbdown after a series of MPs attacked the existing #10m limit to the Enterprise Investment Scheme.

The attack was led by Tory MP Tim Loughton who warned the limit set a trap for companies below the tax relief qualification mark.

He said: ‘About half the companies quoted in AIM have a market capitalisation of more than #10m and many have substantially more. The Stock Exchange has warned that a third of AIM-listed companies could face liquidity problems as a result of the bill and the demand for such higher risk, smaller companies would fall as a result.’

Labour MP Douglas Alexander attacked the Tories for suggesting capping limits of #30m to #50m, but called on Liddell to consider ‘an amount that would involve a much lower cost to the Exchequer.’

Liddell insisted the purpose was to encourage investment in small, hi-tech companies that do not have ready access to other sources of venture capital and complained the limits pressed by Tories would cost #50m a year.

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