While traditional trusts remain a valuable tool, many families are now turning to the Family Investment Company (FIC) as a flexible, tax‑efficient way to preserve, manage and grow wealth throughout generations.
In this blog, our Wealth Protection Team explore FICs, why they are becoming a popular choice in estate planning in England and the main benefits and considerations.
What Is a Family Investment Company?
Although a FIC operates like an ordinary company, its distinguishing feature is its ownership and control structure, deliberately designed to separate control from value.
FICs allow founders (normally parents) to:
- retain control over investment decisions;
- pass economic value to children or future generations; and
- do so in a tax‑efficient and structured manner.
When Are Family Investment Companies Used?
1. Retain control while gifting value
Parents often want to provide long‑term financial security for younger generations without relinquishing immediate control over how money is invested or accessed.
- hold voting shares, giving them control over investment decisions and when to pay dividends; and
- gift or create growth shares for children, which carry the right to future capital growth of the company, but without handing over decision‑making power.
2. Reduce Exposure to Inheritance Tax (IHT)
By transferring value into a FIC, for example by way of loans or gifts, founders may reduce the value of their own estate over time. Growth in the value of the company can accrue to younger generations, often outside the parents’ estates for IHT purposes.
3. Provide a Structured Investment Vehicle
4. Create Long-Term Governance
Key Benefits of a Family Investment Company
1. Tax Efficiency
Investment returns, such as dividends from other companies, may also be taxed favourably within a company structure, allowing reinvestment into the FIC.
The potential tax advantages include:
- corporation tax rates applied to investment income;
- the ability to repay directors’ loans tax efficiently; and
- potential mitigation of future inheritance tax on growth shares
2. Flexibility in Structuring
- bespoke articles of association;
- different classes of shares; and
- rules around share transfers and distributions to keep family wealth within the family.
4. Asset Protection
- restricting share transfers;
- safeguarding family wealth from divorce claims via pre‑agreed restrictions; and
- limiting personal liability through the corporate structure
The key benefits of a FIC compared to personal ownership of the assets are set out below:
Personal Ownership |
FIC |
|
|
Tax |
Higher personal tax rate, dividends are taxed at personal rates and there is full exposure to inheritance tax |
Lower corporation tax rates, lower dividend tax and efficient inheritance tax planning. |
|
Control |
Direct control |
Voting rights and direct management of the company’s decisions through the board of directors |
|
Protection |
No protection from liabilities arising. |
Personal liability limited to the value of the shares. |
|
Succession |
Assets stay within your estate |
Growth sits outside your estate |
Key Considerations Before Setting Up a FIC
1. Initial Tax and Long‑Term Tax Compliance
Transferring assets into a FIC may trigger:
- capital gains tax;
- stamp duty land tax; and
- other transaction‑related taxes.
2. Governance Must Be Carefully Drafted
- articles of association; and
- loan agreements.
Is a Family Investment Company Right for You?
Family Investment Companies can be an effective means for long‑term wealth planning, investment management, and inter‑generational gifting.
However, the structure must be designed carefully to balance control, tax efficiency, and the family’s long-term goals.
Our Corporate and Private Client teams regularly advise families on the creation, governance, and tax structuring of FICs.
We work closely with accountants and financial advisers to guarantee the structure is right for your personal circumstances.
If you are considering setting up a Family Investment Company or would like to understand whether it may be suitable for your family, please get in touch with our specialist team.
Contact Our Family Investment Company Experts
If you are considering a Family Investment Company, our Private Wealth and Corporate teams can advise on whether this structure is right for you.
Contact our specialists to arrange a confidential discussion.
0161 941 4000
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Olivia Rollinson
Solicitor
Olivia is a corporate solicitor specialising in all aspects of corporate law, advising companies, directors and shareholders on a wide range of commercial matters. She graduated from BPP University with a distinction in both the Graduate Diploma in Law (GDL) and the Legal Practice Course (LPC), before completing a two-year training contract gaining broad experience across multiple practice areas.
Since qualifying, Olivia has advised on mergers and acquisitions, share schemes, loan agreements, corporate reorganisations and succession planning, regularly working alongside tax advisers and accountants. She also drafts and negotiates shareholders’ agreements and advises on corporate governance, delivering clear, practical and commercially focused advice tailored to each client’s objectives.
About Olivia Rollinson