The popularity of Family Investment Companies (FICs) has been increasing over recent years, and for good reason as they can provide an effective tool for retaining family wealth and passing on assets to future generations. The relevance of FICs is perhaps even more timely now that HMRC is no longer reviewing them as a potential area of non-compliant behavior.
If you are looking for a way to protect your hard-earned profits and wealth, you may want to consider a Family Investment Company. While trusts have more traditionally been relied upon for succession planning, the structure and tax advantages of FICs have much to offer.
What is a Family Investment Company?
A Family Investment Company is a private company whose shareholders are family members, and it is often seen as an alternative to a family trust. It is usually controlled and operated by directors (the parents/guardians) and owned by family members (the children) in the form of shares.
Investment decisions are made by directors and the FIC is used to transfer assets to family members, while retaining control of the wealth gifted or transferred.
An FIC generally focuses on investing as opposed to trading, and usually these investments are equity portfolios or property.
The Benefits of a Family Investment Company
If setup with the right structure, then a FIC could have numerous benefits, including:
- Retaining wealth and assets to be passed on to future generations
- Benefit from UK Corporate tax rates of 19% as opposed to personal tax rates of up to 45%
- Simplistic structure, particularly when compared to trusts
- Up to £14,500 in dividends could be given to any shareholder (18 and over) and dependent on other income, this may be free of income tax
- Inheritance Tax Relief is available
- Suited to property investment, as annual profits can be passed to parents/grandparents whilst capital growth is distributed to children/grandchildren providing strong Inheritance Tax benefits
How to set up a Family Investment Company
Structures such as FICs are most effective for people with substantial assets or cash to invest, however even those with moderate wealth are beginning to view them as an attractive option. They are also most well suited to those who plan to keep the investment within the FIC as opposed to those who will need to make regular withdrawals.
If you are interested to find out more about FICs or pursue the process of setting one up, then the team at Kingston Burrowes can support you. We will work with you to review your situation and ensure that an FIC is the best option for you. We can help you to determine the appointment of directors, the transfers of shares, and the distribution of annual profits, as well as dealing with Companies House for the incorporation of your company. For more information, please contact our team on 020 3627 4321 or email us.