Daniel Cane, Investment Director | March 2025 

In this article, Daniel talks about the growing interest in AIM VCTs, despite the fact that there have not been many new shares released recently. He explains the tax benefits of AIM VCTs and why it's important to have experts who can find and manage the right investment.

The Alternative Investment Market (AIM) is a stock-picker’s market. It has lots of potential winners and the advantage of hosting shares that qualify for the generous tax reliefs available through Venture Capital Trusts (VCT), which include tax-free growth and dividends, as well as 30% upfront income tax relief¹. That makes it the focus of specialist active AIM VCT investment managers like those at Puma Investments, where we have experience of successfully identifying and exploiting the great opportunities to be found on an exchange, with +47% post-IPO price performance since-inception².

The investible universe 

Whilst the AIM market is home to roughly 680 companies (with a further 100 on Aquis), AIM VCT managers can invest in a select portion of this dynamic market due to HMRC’s VCT rules. This AIM VCT universe accounts for less than 10% of the overall AIM market by capitalisation.  

These rules are designed to ensure that in exchange for tax advantages that accrue to VCT investors, young companies with growth opportunities can gain funding. In summary, these rules prevent investment in an undertaking involved in an excluded trade, that breach the maximum allowable gross assets of £15 million immediately prior to investment, that don’t have a permanent UK establishment, that have been trading for too long (generally over seven years) or that are too large and exceed the maximum number of employees (generally up to 250 full-time equivalent staff). 

What’s more, VCT income tax relief, a valuable element of investment into VCT shares, is available only if the manager subscribes for a new share issue – shares bought second hand on AIM will not qualify, as per VCT rules. New share issuance by companies has been subdued in recent years as investor appetite was limited by a punishing interest rate cycle and the lessons learned from the previous IPO boom. There are now signs of renewed life and we see a good pipeline of qualifying prospects from both IPOs and already listed businesses, making a disciplined and well-informed investment process crucial to identify the best opportunities to deploy capital.  

A disciplined process 

Added to that, an AIM VCT investment manager needs to be realistic about the amount of money that can be successfully deployed, and that requires a good knowledge of market participants, conditions, and upcoming and ongoing share issues. 

At Puma Investments, we leverage long-standing associations with AIM, stretching back to the inception of the market in 1995, allowing us to develop strong relationships with the NOMAD and broker community. A NOMAD must be appointed by a company on admission to trading on, and throughout its life on, AIM. These are the relationships that can facilitate access to all relevant AIM fundraises, to assess suitable investment opportunities.  

Positive experience 

We are continuing to see a steady flow of VCT-qualifying opportunities from companies in the AIM market, which hasn’t been there for the previous couple of years. This improvement in supply, together with over a decade’s practical experience of selecting Business Relief-qualifying AIM companies for our Puma AIM IHT Service, sets us in good stead to capitalise on this opportunity for our clients.  

That track record, which includes monitoring and ensuring the investments retain qualifying status, and selecting those with best performance, is in the top quartile on the ARC Index over both three and five years³. The current Puma AIM IHT Service performance, sitting at 74.73% (as at 31 January 2025, see full performance below)⁴, compares favourably against the vast majority of the Puma AIM IHT Service's peer group, attesting to a strong investment process and the reality of tax-efficient AIM outperformance.

For investment professionals only.

Past performance Puma IHT Service

Discrete investment performance % of PUMA AIM IHT Portfolio Service: 2024: -6.37, 2023: +5.72, 2022: -14.24, 2021: +28.39, 2020: +2.81. All figures correct as at 31 December 2024.³

Sources and notes

¹ Tax reliefs depend on an individual’s circumstances and may be subject to change. Please note that for subscriptions made on or after 6 April 2026, investors will be able to claim up to 20% income tax relief on VCT investments up to £200,000 each tax year

² London Stock Exchange, 31 December 2024

³ ARC Research Limited (ARC), Puma AIP Composite Report as at 31 December 2024

⁴ Puma Investments, 31 January 2025.