What is a Family Investment Company?
A Family Investment Company is a UK-resident private limited company, typically used by families to hold and grow wealth, most often through investments rather than trading activity. The shareholders of the company are usually family members, and the structure allows the founders to retain control while passing on wealth in a tax-efficient and structured manner.
FICs are often funded through loans from the founders or with gifted capital, which is then invested in a range of assets, including property, shares, and bonds. The company pays Corporation Tax on its profits, and any income or gains retained within the company can be reinvested at the corporate tax rate, which is generally lower than personal income tax rates.
Key Benefits of a FIC
- Tax Efficiency: Profits within a FIC are subject to Corporation Tax, which can be significantly lower than personal Income Tax or Capital Gains Tax rates. This allows wealth to grow in a more tax-efficient environment. Remuneration can be drawn by different family members to utilise their respective income tax bands.
- Asset Protection and Control: FICs offer a structure where the founder can retain control (e.g., through voting shares or directorships), while transferring economic value to children or other family members through non-voting shares.
- Succession Planning: By passing shares to the next generation, families can facilitate long-term succession and mitigate inheritance tax (IHT) liabilities. Transferring shares during lifetime can reduce the value of an estate subject to IHT. This is even more useful following the recent restrictions placed on Business Property Relief (BPR).
- Investment Flexibility: FICs can hold a wide variety of assets, and investment decisions are made by the directors of the company, offering centralised control of family wealth.
- Privacy and Professional Oversight: As a corporate structure, a FIC can operate discreetly and allows for professional management and governance, which can be attractive for families with significant wealth.
Why Consider a FIC Over a Trust?
FICs are often used as a modern and more flexible alternative to traditional trust planning. While trusts remain a valuable planning tool in certain circumstances, they are increasingly subject to complex tax rules, reporting requirements, and restrictions on control. By contrast, a FIC offers:
- Greater Control: Founders can retain control over decisions through voting shares or directorships, while passing economic value to family members via non-voting shares.
- Enhanced Flexibility: Unlike trusts, which are governed by rigid legal frameworks and trustees, FICs provide a company structure that can be tailored to suit a family’s unique needs, including changes over time.
- Favourable Tax Treatment: FICs pay Corporation Tax on profits, which is often lower than personal Income Tax and Capital Gains Tax. This allows investments to grow more efficiently within the company.
Is a FIC Right for You?
FICs are particularly well-suited to individuals and families with substantial assets who are looking to manage generational wealth, protect family interests, and optimise tax outcomes. However, the decision to set up a FIC should be based on a full understanding of the legal, tax, and administrative implications.
At Dominic Hill Associates, we work closely with clients to assess their specific needs and provide tailored advice on the creation and operation of Family Investment Companies. Our services include company formation, tax planning, shareholder structuring, ongoing compliance, and estate planning. We work in collaboration with legal professionals to ensure that the FIC structure is legally watertight and compliant.
Speak to a Tax Expert at Dominic Hill
If you’re considering a Family Investment Company or want to learn more about how it could benefit your family, contact us today for a free initial consultation. We’ll guide you through the process and help you build a structure that works for generations to come.