More investors are looking towards the potential of companies listed on the Alternative Investment Market (AIM) as a means of shielding them from inheritance tax. The attraction is that AIM investment schemes confer inheritance tax relief after just two years compared with the seven years required for lifetime gifts.

Business property relief, as the IHT exemption is known, was introduced in 1984 with unquoted company shares - including AIM and OFex traded stocks - added as a qualifying category in 1996.

Until now, many investors have been put off AIM shares because of the volatility and vulnerability of small cap companies. These risk factors remain but the growing number of AIM-listed stocks - just over 1,300 - and the increasing maturity and diversity of individual companies have made the unquoted market more attractive.

Business property relief also allows investors to switch their holdings around within their portfolio. They are not required to hold the same stock for the entire two-year period. Inheritance tax has become less of a 'voluntary tax' as thresholds have failed to keep up with increases in the wealth held by individuals, particularly property. AIM investments offer alternative solutions.