AIM Portfolio Service 1
Alternative Investment Market (AIM)
Portfolio Service
AIM Portfolio Service 2
Introduction to the
Brooks Macdonald
AIM Portfolio Service
Brooks Macdonald’s AIM Portfolio Service (the Service) is an actively
managed discretionary portfolio of Alternative Investment Market
(AIM) listed companies. Brooks Macdonald also oers an AIM Individual
Savings Account (ISA) service.
Each portfolio within the Service is comprised of 30 to 40 AIM listed
companies, based on a guidance model portfolio. Individual holdings
that oer sound investment potential are selected using a conservative,
long-term investment process.
Under current legislation, Inheritance Tax (IHT) benets can potentially
be derived on the death of an investor if certain AIM listed assets have
been held for at least two years, under the UK’s Business Relief (BR)
regime. This relief was introduced by the 1976 Finance Act to encourage
private individuals to support small but growing companies.
The Service is not a collective investment scheme and its simplicity is
a major attraction. The Service is a portfolio of shares that are eligible
for BR qualication and as such the client retains ownership of the
underlying assets. Cash can therefore be realised at any time, although
the proceeds raised and the exact timing of settlement will be dictated
by prevailing market conditions at the time of dealing.
Withdrawals may also compromise any accrued IHT benets.
The Service was established in July 2011 and has a demonstrable
track record and strong position in this market.
For performance data, holdings information and minimum investment
levels please refer to the latest factsheet.
Tax treatment depends on your individual circumstances and may be subject to change in the future.
Business Relief (BR) is not guaranteed and remains at the discretion of HMRC to be determined on the
death of the individual. The individual could die before the two year BR qualication period has been
achieved. It is important to note that the BR tax regime itself could be withdrawn by the UK Government
at any point in the future.
Individual holdings that oer sound
investment potential are selected using a
conservative, long-term investment process.
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Brooks Macdonald does not provide tax advice and independent
professional advice should be sought.
What is the Alternative Investment Market
(AIM)?
The London Stock Exchange (LSE) founded AIM with a view to
providing smaller growing companies with a platform upon which
they could eciently raise capital. A wide range of businesses
including both early stage and more established companies join
AIM seeking access to an international shareholder base to fund
their future growth prospects. These companies can be domiciled
internationally and operate within any sector.
History of AIM
AIM was launched in 1995 with ten member companies with a
collective value of £82.2 million. Since then over 3,800 companies
have joined and raised more than £115 billion in new and further
capital fundraisings. The AIM market currently consists of 850
companies with a combined value of approximately £104 billion
(London Stock Exchange March 2022).
Examples of AIM member companies
Companies that are members of AIM include well known names
such as Fever-Tree Drinks (premium mixers), Hotel Chocolat (luxury
chocolates), Nichols (producer of the popular so drink Vimto) and
Boohoo.com (online retailer). Many other AIM-listed companies
do not have consumer facing brands but do have long-standing
relationships with many well-known multinational companies.
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Inheritance Tax (IHT)
IHT is a UK tax on the estate (the property,
money and possessions) of a deceased
individual. The standard IHT rate is currently
40%. It is charged on the portion of the estate
that is above the tax free threshold, which
is currently £325,000 per person (and is
subject to change). If you give away your
home to your children or grandchildren,
your threshold will increase to £500,000. If
you are married or in a civil partnership and
your estate is worth less than your threshold,
any unused threshold can be added to your
partner’s threshold when you die.
Example: Your estate is worth £500,000 and
your tax-free threshold is £325,000. The IHT
charged will be 40% of £175,000 (£500,000
minus £325,000) which is £70,000.
From a tax planning perspective there are
multiple ways in which you can reduce
your estate which will be subject to IHT. The
most common strategies are listed below.
Please note, however, that we are not tax
specialists and cannot oer tax planning
advice. Please seek independent tax advice
and note tax treatment depends on individual
circumstances and may be subject to change
in the future.
Gis during life (dened as anything that has a value, such as money,
property, possessions)
Gis (outside of your ‘annual exemption’ and ‘exempted gis’) are not counted
towards the value of your estate only aer seven years have passed. Gis
made three to seven years before your death are taxed on a sliding scale.
Gis given in the three years before you die, are charged at 40%.
Gi to charity in your will
The estate can pay IHT at a reduced rate of 36% on some assets if you
leave 10% or more of the ‘net value’ to charity in your will.
Business Relief (BR)
BR allows some assets to be passed on free of IHT or with a reduced bill.
A client can receive 100% BR on a business or interest in a business and
shares in an unlisted company (where AIM shares
are considered to be unquoted for tax purposes).
Tax treatment depends on your individual circumstances and may be
subject to change in the future. Business Relief (BR) is not guaranteed
and remains at the discretion of HMRC to be determined on the death
of the individual. The individual could die before the two year BR
qualication period has been achieved. It is important to note that the
BR tax regime itself could be withdrawn by the UK Government at any
point in the future.
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About Business
Relief (BR)
BR is an established part of IHT legislation, enabling BR qualifying
investments that have been held for at least two years to be passed
on potentially free from IHT on the death of the investor.
Our intention is to invest only in AIM-listed companies that qualify for
BR. When selecting our holdings we refer to the tax statute governing
BR. For example, stocks must be dened as ‘trading companies’ to
qualify, therefore we will avoid certain businesses such as, property
companies, cash shells and investment companies. However, we
cannot be certain that each company will ultimately qualify for BR,
as this remains at the discretion of HMRC on the death of the investor.
We do engage the services of a leading accountancy practice to
provide further independent oversight for BR qualication purposes.
Our intention is to invest only in
AIM-listed companies that qualify for
BR. When selecting our holdings we
refer to the tax statute governing BR.
Tax treatment depends on your individual circumstances and may be subject to change in the future.
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BR example
Below is an example of how investment in BR
qualifying AIM stocks can reduce the amount
of IHT ultimately payable on an estate. The
example details multiple scenarios for a
client with £700,000 of funds available for
investment and assumes that the individual
has no nil rate band le.
The example shows that even if the client’s
AIM portfolio fell by 40% in value, they would
still have the same net value of estate (aer
IHT has been deducted) as a portfolio that had
not invested in qualifying AIM assets.
Although the risk prole of the Service may
be considered higher than other IHT planning
strategies (such as gis or life insurance), for
some clients the accelerated qualication
period and the retention of asset ownership
can represent an attractive investment with
an added tax planning opportunity.
AIM investment start £200,000 £200,000 £200,000 £200,000 £200,000 £0
AIM Portfolio Service
illustrative performance
40% £280,000 – – – – –
20% – £240,000 – – – –
0% – – £200,000 – – –
-20% – – – £160,000 – –
-40% – – – – £120,000 –
AIM investment end assuming
two years ownership
£280,000 £240,000 £200,000 £160,000 £120,000 £0
Other assets £500,000 £500,000 £500,000 £500,000 £500,000 £700,000
IHT payable at 40% £200,000 £200,000 £200,000 £200,000 £200,000 £280,000
Net value of estate £580,000 £540,000 £500,000 £460,000 £420,000 £420,000
Above table is for illustrative purposes only and assumes nil-rate band used against other assets. Portfolio must
normally be held for two years in order to achieve BR relief. Past performance is not a reliable indicator of future
results. BR could be withdrawn at any time.
Tax treatment depends on your individual circumstances and may be subject to change in the future.
Business Relief is not guaranteed and remains at the discretion of HMRC on the death of the individual.
The individual could die before the two year BR qualication period has been achieved. It is also important to
note that the BR tax regime itself could change or be withdrawn by the UK Government at any point in the future.
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Brooks Macdonald
investment process
Our investment process is fairly conservative in nature and as such
we have a bias towards (but not a contractual obligation to restrict
ourselves to) companies with strong balance sheets, robust cash ows
and demonstrable track records of protability. We are also attracted
to companies with attractive but secure, sustainable and growing
dividends. In terms of qualitative factors, we look for companies
boasting high market shares in niche industries with defendable and
sustainable competitive advantages and benetting from structural
(rather than cyclical) growth tailwinds. We believe that these qualities
lead to attractive and sustainable protability. Valuations are clearly
also important.
In terms of a new portfolio within the Service, we would normally
expect 50% of the portfolio to be invested fairly promptly and fully
invested four weeks aer the rst investment is made. Under the terms
of our AIM Service rules each new portfolio must be fully invested
(i.e. less than 5% cash) within six weeks of the initial starting date.
Transfer of estate on death
On notication of the death of the investor within the Service we will
continue to actively manage the portfolio until we receive instructions
to the contrary from the executors. An original copy of the death
certicate will also be required as part of the process.
We will also provide executors with a basic valuation of the portfolio
as at the date of death and a transaction history to assist with taxation
matters and the winding up of the estate.
We can facilitate in-specie transfers or liquidations subject to receiving
the required documentation.
Under UK ISA legislation, in cases where the holder of an ISA portfolio
dies, the surviving spouse/civil partner is entitled to an additional ISA
allowance equivalent to the value of the deceased’s ISA as at date of
death. This is available whether the surviving spouse/civil partner
inherited the estate of the deceased or not and either in cash or in
specie. If the surviving spouse/civil partner does not inherit the estate,
an Additional Permitted Subscription (APS) can be made in cash only
from their own resources.
Tax treatment depends on your individual circumstances and may be
subject to change in the future.
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Risks involved
The more volatile nature of the AIM market and the fact that the
portfolio will remain fully invested in a single asset class and
geography (i.e. UK equities) leads us to describe the investment
mandate as ‘high risk’. Investors should be aware that the price
of investments, as well as the income from them, can go down as
well as up and that neither is guaranteed. Further risks include the
reduced liquidity associated with the AIM market and the fact that
the BR regime itself could be subject to change (or withdrawal) in the
future. It is also important to note that BR qualication remains at the
discretion of HMRC and is only tested upon the transfer of inheritance.
Accordingly, BR is not guaranteed and as such there is a risk that a
holding may not ultimately qualify. We do, however, endeavour to
ensure that our investment universe is restricted to those companies
that we believe qualify for BR.
How we manage risk
We have a number of strategies in place to ensure that we
appropriately manage the risk that investing in AIM companies
presents. Philosophically, whenever we add an investment to a
client portfolio we always consider how much risk we are taking
and whether the potential additional investment return adequately
compensates the client for the risk being assumed.
At a practical level, a key risk control is that we should not own more
than 3% of a company’s share capital within the Service. This rule is in
place to support liquidity considerations and our ability to buy and
sell shares at our own discretion. In addition, at an individual portfolio
level, our maximum individual holding size is 10% of the portfolio
value with no more than 5% of the portfolio invested into a single
holding at the outset.
Philosophically, whenever we add an investment to a client
portfolio we always consider how much risk we are taking
and whether the potential additional investment return
adequately compensates the client for the risk being assumed.
Tax treatment depends on individual circumstances and may be subject to change in the future.
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The Service can only be accessed through a professional adviser who
agrees to take responsibility for suitability including the assessment of
the client’s risk appetite and capacity for loss. The adviser will complete
a ‘request for an investment portfolio report’ form on the client’s behalf.
Once processed, the Brooks Macdonald AIM team will produce a
formal AIM proposal report and send this to the client’s professional
adviser along with all relevant application documentation.
The account opening is processed by our Edinburgh administration
team who will advise by email when the application form has been
received and once the account has been opened, to advise that capital
can now be accepted for investment.
Please note, we are unable to manage accounts on a combined basis
and minimum investment levels apply, please see the latest factsheet
for details. For example, we cannot manage ISA and non-ISA funds
on a combined basis as one account.
Contact us
For further infomation or to request a client specic proposal report,
contact us via the details below.
AIM@brooksmacdonald.com
020 7408 5574
www.brooksmacdonald.com
How to invest
AIM Portfolio Service 10
AMC 1.25% + VAT
Dealing
charges
Up to £10,000 1.00%
From £10,001 to £250,000 0.15%
£250,001 and upwards 0.11%
AIM ISA
portfolios
Up to £30,000 0.5% + VAT is levied
£30,001 and upwards 0.1% + VAT is levied
In addition, AIM ISA portfolios are subject to the charges below.
Fees and
charges
The fees and charges of the Service are outlined below.
Annual Management Charge (AMC) plus dealing
1
All-inclusive AMC
AMC of 1.75% per annum plus VAT, charged against individual
portfolios on a quarterly basis. This charge includes all dealing
and ISA administration costs.
We do not charge either an initial fee or an exit fee, however,
corresponding dealing fees or in-specie transfer charges may apply.
Professional advisers have the opportunity to levy both initial
and recurring adviser charges via AIM Service portfolios, provided
these charges have been agreed in advance with the client and
are documented in the client agreement.
2
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The AIM
Portfolio Service
Contacts
Ewan Millar
Senior Investment Director,
Head of AIM
Ewan joined Brooks Macdonald in 2020 and
is the head of our Alternative Investment
Market (AIM) Portfolio Service. Ewan sits
on our Direct Equities research team.
Previously, Ewan was a Senior Investment
Manager at Cornelian Asset Managers before
its acquisition by Brooks Macdonald. Prior to
that Ewan spent ten years at Kempen Capital
Management (UK), working in their Small
Cap team where he was the co-lead manager
of their agship European Small Cap fund.
Ewan is a Chartered Financial Analyst
(CFA) Charterholder.
Joe Capaldi
Inve
stment Director
Joe joined Brooks Macdonald in 2022 and is
an Investment Director on our Alternative
Investment Market (AIM) Portfolio Service
and sits on our Direct Equities research team.
Prior to joining Brooks Macdonald, Joe
worked at CS Investment Managers
(formerly known as Charlotte Square
Investment Managers) in Edinburgh for
eight years where he was an Investment
Director and head of the AIM IHT Service.
Joe managed a variety of private client
mandates but specialised in tax ecient AIM
portfolios. He has over 10 years’ experience
in nancial services.
Joe attained a rst-class honours degree
in Management & Business Enterprise
from the University of Strathclyde in 2011
and is a Chartered Financial Analyst (CFA)
Charterholder.
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Important information
Investors in the Brooks Macdonald AIM Portfolio Service should be aware that
the price of their investments and the income from them can go down as well
as up and that neither is guaranteed. Past performance is not a reliable indicator
of future results. Investors may not get back the amount invested. Changes in
rates of exchange may have an adverse aect on the value, price or income of an
investment. Investors should be aware of the additional risks associated with funds
investing in smaller companies.
The information in this document does not constitute advice or a recommendation
and investment decisions should not be made on the basis of it. This document is
for the information of the recipient only and should not be reproduced, copied or
made available to others. Tax treatment depends on individual circumstances and
may be subject to change in the future. Brooks Macdonald does not provide tax
advice and independent professional advice should be sought.
Business Relief is not guaranteed and remains at the discretion of HMRC on
the death of the individual. The individual could die before the two year BR
qualication period has been achieved. It is also important to note that the BR
tax regime itself could change or be withdrawn by the UK Government at any
point in the future.
AIM companies can be illiquid in nature, meaning that it can be dicult to
implement purchase or sale decisions during periods of market volatility.
Brooks Macdonald is a trading name of Brooks Macdonald Group plc used
by various companies in the Brooks Macdonald group of companies. Brooks
Macdonald Group plc is registered in England No: 04402058. Registered office:
21 Lombard Street, EC3V 9AH.
The AIM Portfolio service is provided by Brooks Macdonald Asset Management
Limited. Brooks Macdonald Asset Management Limited is authorised and
regulated by the Financial Conduct Authority. Registered in England No: 03417519.
Registered office: 21 Lombard Street, EC3V 9AH.
More information about the Brooks Macdonald Group can be found at
www.brooksmacdonald.com.
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