Budget 2013: Stamp duty to be abolished on AIM shares

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Chancellor George Osborne has revealed plans to abolish stamp duty on shares traded on the Alternative Investment Market (AIM) and ICAP Securities and Derivatives Exchange (ISDX) as part of the 2013 Budget.

The move was widely welcomed by analysts, echoing the Chancellor's comments that the move would benefit hundreds of small business in the UK.

"With 1,100 companies, AIM is home to three times as many companies as the FTSE 350," pointed out Giles Hargreave and Oliver Bedford, co-managers of the Hargreave Hale AIM VCTs. "Many of these are developing the technologies and products of the future and looking for growth capital through AIM.

"[Wednesday's] announcement by the Chancellor acknowledges their contribution to the UK and will, we hope, encourage more investors to consider an investment into this vibrant market."

They stressed that abolishing stamp duty on AIM shares would "speed up the movement of capital into smaller company equities and help more AIM-listed stocks gain visibility and make a great growth market story more attractive to more investors".

Patrick Reeve, managing partner at Albion Ventures, said the Budget demonstrated the government was mindful of the role growth companies were playing in advancing the UK's progress down the road to recovery, stating: "AIM is the magnet that attracts smaller companies towards venture capital funding.

"In recent years, AIM has lacked the necessary power to fulfil this role effectively, but the Chancellor's announcement to scrap stamp duty on growth markets such as AIM provides a much-needed fillip."

Jeremy Trent, tax partner at HW Fisher & Company chartered accountants, added: "The investment community has been asking the government for help to encourage growth markets and the abolition of stamp duty on shares traded on markets such as AIM will be welcomed by both investors and businesses seeking to raise finance.

"This could further stimulate transactions that have been lacking in the past five years."

But Richard Gill, editor of small cap specialist investment website t1ps.com, was of the opinion that the move would have very little effect on demand and liquidity for shares in these markets.

"Stamp duty amounts to just 0.5% of every transaction - 50p in every £100 - so is hardly likely to attract more investment in markets in which investors are looking for high double- and treble-digit gains," he noted.

"What Osborne really needs to do to attract new investment is make AIM shares eligible for stocks and shares ISAs, a move which would significantly improve returns for investors in the long-term."

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Looking for the lowdown on the government's spending plans for the coming year? Get all the build-up and reaction to George Osborne's speech in our Budget 2013 special.