Family investment companies

What are the advantages of a family investment company?

You could pay less tax

Family investment companies (FICs) are separate legal entities. Profit is taxed at corporation tax rates, which can be lower than personal rates of tax. Crucially, dividends received by the FIC are not subject to corporation tax which offers opportunities to grow wealth within the structure in a tax efficient way. For property owning FICs, there is still relief available for interest on loans that is no longer available for individuals. If profits are distributed to shareholders as dividends, they do suffer an additional layer of personal tax in the hands of the recipient, so FICs can be most tax advantageous when used as a growth vehicle for family wealth.

You stay in control

You can use a family investment company to transfer value to the next generation while keeping control over the wealth. That’s because you can give cash to family members to allow them to subscribe for shares or set up a family trust with sufficient funds to purchase shares for the future protective benefit of selected family members (such gifts being outside of your estate for inheritance tax after seven years). You can be a director of the family investment company or appoint directors of your choice and ensure that the governance documents are structured to offer maximum protection.

Your assets are protected

Assets held by the family investment company are separate from shareholders’ personal assets. This can protect them against personal liabilities for business debts or legal claims. Although the value of shares held by an individual will be taken into account on a divorce or bankruptcy.

They’re flexible

A family investment company can invest in a wide range of assets, including property and shares. So you can diversify your investment portfolio for higher returns.

They can bring you together

Family investment companies can give your family a structured way to share information about family wealth, to educate the next generation on how to manage and protect that wealth, to set out family expectations (such as a requirement to have a marital agreement), and to share investment decisions and rewards. They help family members work together longer-term.

Our lawyers

We set up our first family investment company in 2009 and since then we’ve established many more. Over the years our clients – which include wealthy families and individuals, business people, and landowners both in the UK and overseas – have invested more than half a billion pounds in FICs.

Our experience

Here are just a few examples of our family investment company work:

• we enabled grandparents to efficiently fund their grandchildren’s school fees and plan their estate through an FIC
• we helped two business partners establish FICs for their children, which in turn invested in their property company. This saved them inheritance tax and let them keep their property investment business too.
• we helped a family establish an FIC which then bought investment properties previously held personally. This created a vehicle for the next generation to manage that took advantage of investments and built the family’s wealth.
• we helped one of our family investment companies get valuable trading company shares from a family trust, so they could issue new shares without paying capital gains tax. The family investment company is now accumulating tax-free dividends from the trading company.
• we created a family investment company so an international resident could transfer an investment property tax efficiently before returning to the UK