Small firms may get boost in ISA reforms

The Quoted Companies Alliance (QCA) yesterday welcomed the announcement of plans to include Alternative Investment Market (AIM) shares in ISAs.

The Government plans to consult industry groups about plans to widen the UK's Venture Capital Schemes, including the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs).

The Government also plans to hold consultation on the inclusion of AIM shares in ISAs, which would help to increase retail investment in AIM companies and also raise liquidity in the market.

The QCA, along with the London Stock Exchange and other bodies, has been lobbying the Government to consider these issues as a way of

increasing investment into the small and mid-cap quoted company sector and help fill the "equity gap" for these companies.

The QCA highlighted the fact that these companies generate a large amount of the UK's wealth and employment.

In December 2009, the QCA wrote to the Chancellor, requesting that a working group be set up to look at the structure of equity markets.

The QCA criticised the "confusing and piecemeal approach" to tax rules relating to VCTs and the inclusion of AIM shares in ISAs. Following this, the QCA has started a petition on the Number 10 website, which has attracted more than 400 signatures, to put pressure on the Government to act.

Tim Ward, the chief executive of the Quoted Companies Alliance, said: "We welcome the Government's announcement in the Budget to consult on these tax measures.

"This is a clear sign that the Government is recognising that the small and mid-cap quoted company sector is at the heart of the UK economy.

"We look forward to continuing our dialogue with them to ensure that small and mid-cap quoted companies have greater access to capital, at a time when access to funding has been severely limited by prevailing economic conditions.

"This is a step forward in our campaign to get the Government to set up a working group to examine the structure of UK equity markets. But much more needs to be done to get joined-up thinking among Government departments on equityfunding for small and mid-cap quoted companies, and we continue to call on Government to set up this group to facilitate this debate."

Martin Payne, the divisional director of Leeds-based stockbrokers Brewin Dolphin, said: "We would welcome anything that encourages equity investment as it is the basis on which companies grow. This consultation announcement is good news and at least gets the Government on the road towards a conclusion.

"As far as the YP75 is concerned, about half of the index is made up of AIM stocks, and anything that encourages additional investment in local companies would be welcomed."

Mr Payne said qualifying AIM shares have advantages because "they escape the clutches of inheritance tax" if held for a period of two years or more.

He added: "It is also important to recognise that AIM stocks carry attractive IHT (inheritance tax) planning breaks, and these may be at least equally valuable for shareholders in AIM companies. As long as the IHT breaks are not removed, ISA investment in AIM stocks would be another welcome development"

A voice for 2,000 companies

The Quoted Companies Alliance (QCA) represents the UK's small and mid-cap quoted companies.

The QCA speaks up for the 2,000 companies that are quoted in the UK outside the FTSE 350.

The QCA promotes the interests and views of its members to Government, Europe, regulators and other professional bodies. It also educates its members about best practices and provides a forum for networking.

Formed in 1992, the QCA acts as a sounding board through committees and working groups, which are made up of directors and professional advisers from across the small and mid-cap quoted company sector. For more information, visit: www.quotedcompanies

alliance.co.uk.