City firms advocate broadened IHT relief to ‘fuel UK stock investment’

The CEO of City brokerage firm, Julian Morse of Cavendish Financial, has urged the government to expand inheritance tax relief to a broader range of London-listed stocks, as reported by This is Money.

Morse contends that such a move would enhance investment in the UK, particularly in smaller companies that play a pivotal role in job creation. Currently, only shares listed on the London Stock Exchange’s junior market, AIM, qualify for inheritance tax relief. Morse and other financial experts propose extending this relief to companies listed on the main market up to a specified market value, rather than eliminating the levy entirely.

Morse emphasized that both Labour and Conservative governments should maintain relief for AIM and unquoted stocks to prevent potential harm to firms, impacting job creation and GDP. Other figures in the City support this initiative, arguing that extending inheritance tax relief to the main market would significantly boost investment in UK stocks.

They believe that the current tax system encourages investment in alternative assets like residential property, contributing to the challenges faced by UK stocks with low valuations. The head of another major brokerage firm in the Square Mile emphasized the need to address this bias against equities, stating that it’s essential to consider ways to encourage investment in main market shares.

Experts suggest that extending inheritance tax relief to main market stocks would have minimal impact on the revenue raised by the Treasury from the levy, estimating a reduction of just 1.4% from the annual £7 billion. Charles Hall, head of research at investment bank Peel Hunt, described this approach as a “very realistic” solution that could alleviate takeover pressures on small and mid-cap companies.

Hall emphasized that such changes wouldn’t be difficult or expensive, and they could contribute to revitalizing the market by boosting demand. The proposal for extending tax relief is favoured by some in the City, as there are concerns that completely abolishing the levy could lead to a significant selloff in AIM shares. This alternative approach seeks to strike a balance between supporting investment and maintaining necessary tax revenues.