Shares digital

Aim’s private investors are on course to face capital gains tax bills up to 80% higher after the chancellor Alistair Darling decided to push ahead with his controversial tax reforms.

While Darling made some concessions to his original plans, it seems these only apply to employees and directors who own more than 5% of the company.

At present a higher-rate tax payer who has held an Aim share for two years benefits from a 75% reduction in their capital gains tax rate from 40% to 10%. But the tax bill now looks like it will rise to 18% from 6 April.

Neil Pamplin, client service director at accountants Grant Thornton, says: ‘We are yet to see the draft legislation but I am assuming it will be 18%, unless you own more than 5% and are an employee, director or other officer.’

The new 18% will apply to gains made by any investor whether a higher or lower-rate tax payer or buying shares quoted on the London Stock Exchange or Aim. But the change is particularly harmful to long-term Aim investors.

Aim securities, by virtue of qualifying as ‘business assets’, are treated by HM Revenue & Customs (HMRC) as being like shares in unquoted companies. Because of this they enjoy enhanced taper relief (a maximum of 75% relief after two years).

Lower-rate tax payers face a particularly sharp increase in their tax bill. If they hold Aim shares for two years they see their starting 20% rate fall to 5%. Like everyone else they will pay 18% from 6 April.

Taking the work out of tax

Want to time your share sales to minimise your capital gains tax bill? A new website has been launched to help private investors get to grips with their tax liabilities. The site – www.timetotrade.co.uk – will give you an insight into how HM Revenue & Customs (HMRC) will treat your gains.

Developed by Sensatus, the portal takes into account indexation, taper relief on Aim shares as well as factoring in the impact of offsetting losses made on other shares. It’ll give you an idea of whether if you were to sell now you would exceed your £9,200 annual tax exempt allowance for the tax year ending 5 April 2008.