Family Investment Companies – Overview

A Family Investment Company (FIC) is a private company used to hold investments for family members. It can be an alternative to trusts for succession planning.

Background Information

Typically parents subscribe for shares or lend funds to the FIC. The company invests in shares, property, or other assets. Different share classes allow control and income to be separated.

Tax Treatment

• Corporation tax on profits (25% main rate from April 2023).

• Dividends received from UK and many overseas companies are often exempt.

• When profits are extracted, shareholders pay dividend tax at personal rates.

  
  

Inheritance Tax

• Value of shares can be gifted gradually using exemptions.

• Growth in the company accrues outside the donor’s estate if structured properly.

Pros

• Lower corporation tax than higher-rate Income Tax.

• Control retained by parents.

• Flexibility with different share classes.

  
  

Cons

• Professional setup costs.

• Corporation Tax and dividend tax on extraction.

• Anti-avoidance rules (settlements, GAAR) must be considered.

A well-designed FIC can combine control, tax efficiency and succession planning. For tailored tax advice you can book in a free discovery call with one of our tax team here to see how we can help. https://calendly.com/flowaccandtax/discoverycall