Family Investment Companies

Family investment companies (FICs) are private limited companies established by families to manage and hold family wealth. They allow families to pool their assets into a corporate structure, providing a vehicle for investment, wealth preservation, and succession planning.

FICs are well-suited for various purposes, including asset protection, tax planning, generational wealth transfer, centralised management of family assets, and facilitating family governance structures.

Advantages of FICs include limited liability protection, flexibility in ownership and control, potential tax efficiency, asset protection, continuity of management, and facilitation of intergenerational wealth transfer.

FICs may offer tax advantages such as lower corporation tax rates compared to income tax rates for individuals, the ability to retain profits within the company for investment or distribution at a later date, and potential tax planning opportunities through share ownership and dividend strategies.

Potential drawbacks of FICs include administrative complexities and costs associated with company formation and ongoing compliance, restrictions on accessing funds held within the company, potential tax implications upon distribution of profits, and the need for careful consideration of family dynamics and governance issues.

Yes, FICs can impact testamentary dispositions, particularly if shares in the company form part of an individual’s estate. Proper estate planning is essential to ensure that the desired distribution of assets aligns with the structure and objectives of the FIC.

Yes, Inheritance Tax (IHT) may apply to FICs, particularly upon the transfer of shares in the company either during the individual’s lifetime or upon death. However, careful planning and use of available reliefs and exemptions can help minimise the impact of IHT on FICs.

In the event of death or divorce, the ownership and control of shares in the FIC may be subject to legal and financial implications. Proper planning and documentation, including shareholder agreements and succession plans, are crucial to address these scenarios and ensure the smooth transition of assets.

Trusts may face taxes such as Income Tax, Capital Gains Tax, and Inheritance Tax, depending on the nature of the trust and its assets. FICs, on the other hand, are subject primarily to Corporation Tax on their profits, with potential tax implications upon distribution of dividends to shareholders. Consulting with a solicitor can help navigate the tax implications of both structures and determine the most suitable option based on individual circumstances.