Family Investment Companies vs Trusts: Which is Right for You?

Will depend upon the rights attaching to each class of shares; usually voting control is reserved to the founder class of shares.

Control is with the trustees who usually must make decisions unanimously.

Privacy

Public filing of certain information is required at Companies House each year.

No public records other than registering the terms of the trust with TRS and therefore more private.

Shares are passed down generations or are held in a trust.

Beneficiaries benefit depending upon the terms of the deed.

Costs to set up

Legal, tax and accounting costs to factor in.

Fees can vary depending on the complexity and number of trusts you wish to implement. If investments are involved, you may also wish to take financial advice.

Annual filing requirements and accounting obligations, as well as ad-hoc professional fees.

Usually annual requirements such as AGM, minutes, trust accounts, deeds, updating TRS and sometimes tax returns (depending on what assets are held).

Flexibility

Very flexible and capable of being structured to suit individual needs.

Customisable and easy to vary to suit your needs. The most frequently used trust is a discretionary trust, which gives your trustees full control to decide how to invest and who to benefit, how much and when (if anything).

The FIC itself is taxed as a company and is therefore subject to corporation tax.

Individual shareholders pay tax on any dividends received at the relevant dividend income rates.

Any tax payable by a shareholder on a disposal of shares should be taxed as capital (subject to capital gains), but it could be taxed as income in certain circumstances (subject to income tax).

Shares will form part of an individual shareholder’s estate and so may be subject to inheritance tax.

Depends on the type of trust set up. Discretionary trusts are taxed on trust rates, which are often high, but the flexibility to appoint out to lower/or non-tax-paying beneficiaries can often mean tax can be reduced or mitigated.