AIM drinks shares can no longer be passed on tax-free

Over and above the tax and wage blows dealt to drinks and hospitality businesses in the Budget last week, Chancellor Rachel Reeves hit investors in some of Britain’s AIM-listed drinks firms, reports Ron Emler.

In a technical move Chancellor Rachel Reeves halved the inheritance tax (IHT) relief on shares in companies quoted on the Alternative Investment Market (AIM).

The AIM market is designed to make it easier for small or medium-sized companies to list their shares and raise capital at lower cost and with more flexibility than the big companies whose shares are traded on the main London market.

Previously AIM stocks could be passed on tax free if held for at least two years before the owner died. But following the Budget those shares will be added to the deceased’s estate and IHT chargeable on most AIM shares will now be set at a rate of 20%.

This affects those who have invested in AIM stocks such as Fever Tree, Youngs, City Pub Group, Distil and Gusbourne.

In the aftermath of the Budget shares in such companies were given a fillip as investors scrambled to switch holdings and find less targeted homes for their
savings, but in the long-term Reeves’ move made them less attractive to hold, especially for those seeking to plan long-term succession.

The Institute for Fiscal Studies said in April that abolishing IHT relief on AIM stocks would raise £1.1bn in the 2024-25 tax year, rising to £1.6bn in 2029-30.

Last week, wine and spirit makers branded the Budget “a kick in the teeth” for businesses and consumers.

“I can confirm that alcohol duty rates on non-draught products will increase in line with RPI [Retail Price Index, at 2.7% in September 2024] from February next year,” Reeves stated. “But nearly two-thirds of alcoholic drinks sold in pubs are served on draught, so today, instead of uprating these products in line with inflation, I am cutting draught duty by 1.7%, which means a penny off the pint in the pub.”

Responding to the announcement, Miles Beale, chief executive of the Wine and Spirits Trade Association (WSTA) said: “We are bitterly disappointed that Labour, despite their manifesto pledge to prioritise growth, has chosen not to listen to business – especially SMEs, which will be hit hardest of all.”