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Family Investment Companies

Family is important to everyone, so we understand how important it is to gain peace of mind that your family will benefit from the wealth and assets you have accumulated throughout your lifetime.

Taking advantage of the tax benefits available can help ensure that your family gets the most out of its assets, reducing tax outgoings and increasing the amount of capital that can be re-invested to ensure continued wealth growth.

What is a family investment company?

A family investment company (FIC) is a UK-resident private company whose shareholders are family members across different generations, that invest money rather than trade. With a FIC, the Founder(s) can better manage and control the family assets now and in the future.

What are the benefits of a family investment company?

As a FIC is for investments rather than trading, it provides a tax-efficient way to manage your assets by holding them via a company, as well as giving families access to tax benefits and greater control over how their assets are distributed.

This tool for preserving wealth and generating further income for future generations can also help to improve family succession planning and make it easier to distribute your assets amongst family members.

  • No immediate IHT charges
    With a family investment company, there is no immediate IHT charge on any gift of shares made by you or another family member, as that gift is classed as being a potentially exempt transfer (PET).Therefore, if you or the family member who made the donation lives for 7 years after gifting the assets, you will no longer be liable for IHT. Being part of a FIC also enables the founder(s) transferring their assets to retain some control of the company, so long as the articles of association are drafted appropriately.
  • Lower tax on profits
    Profit generated by your FIC investments is only liable to corporation tax at a rate of 19% (although this is set to increase to 25% in 2023). This is, therefore, lower than income tax which is usually paid on profit generated outside of an FIC at a basic rate of 20%, a higher rate of 40% and an additional rate of 45%.Shareholders then only pay tax to the extent that the FIC distributes dividends – and if the profits are retained within the company, no further tax is payable.
  • Easier to grow wealth
    You pay less tax on your assets due to you being charged corporation tax rather than income tax on your profits, leaving you with more money to re-invest in further investments that can help your family expand its wealth faster.
  • Better succession planning
    A FIC will remain active if the company is still up and running, which can help to simplify long-term wealth management and succession planning for your family.Some of the shares in the FIC may also be held via a trust (or trusts) if minor beneficiaries are involved, or simply if the founder(s) wishes to exert additional control over the family’s wealth planning.

How can we help?

Professional advice should always be sought when carrying out planning of this nature, as there are many issues to consider – from paying out capital gains tax (CGT) on non-cash assets to ensuring you are always compliant with certain regulations (e.g. filing regulations).

By speaking to our team of chartered accountants in Walsall, we can provide expert advice to your family, and ensure you see the highest return on your assets and, therefore, the maximum financial growth for your family.

We also offer a range of other services to our clients, from corporate tax planning and support with R&D tax credits to estate planning and trusts.

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