jsm tax

Family Investment Companies

A Family Investment Company (FIC) can be a great way for HNWI to structure their investments.

A family investment company can be a great alternative to a trust when structuring the family wealth. Due to the wide ranging suitability of a FIC the company can be structured in a variety of ways to suit the family. Most often a FIC will be established by the older generation to invest proceeds and provide for future generations.

Example

Mr Jones sold recently sold his trading business for several millions and now has a pot of £3m he wishes to invest. He is mindful of the fact that Inheritance tax is 40% and that the £3m pot will likely increase over the years to come as a result of his shrewd investments.. potentially bringing with it a huge tax bill for his children to pay.

He sets up a FIC with himself as the founding shareholder, attached to his shares are the rights to vote meaning he can control the company, and the right to receive a dividend. He does not however have any right to future capital growth. Instead a second class of shares are created with only capital and dividend rights, but no right to vote, these shares are placed into a trust for the benefit of his children.

This means that his shares will not increase in value over time as the company becomes more valuable, instead this growth happens within a trust where there will be low or no tax. 

The £3m of initial capital is invested by way of a directors loan, which can be repaid out of company profits without any additional tax.

Whether a FIC is the most suitable structure for you will depend on your personal circumstances, to find out more schedule a call today.