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.
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.