There are enviable tax advantages to purchasing and holding investment property within a company structure, rather than personally. In addition, there are structures even more effective for tax and inheritance purposes, than using your trading company for the purchase of investment property. One such structure is the Family Investment Company. This can be used alone to increase tax efficiency and grow your investment portfolio or as part of a Lifetime Business Tax Plan, which includes additional advantages that propel your investments and protect your wealth. By using these structures and setting up a property company, HMRC-compliant strategies can be created to save extensive tax burden and increase the ability to grow your portfolio within a protected wrapper.
0% Inheritance tax on existing retained property profits
0% Corporation tax on property investment profits
Separates trading business from property investments
Loan property gains to back to your trading company
Invest in a variety of property or other asset classes
Retain business property relief for your trading company
Create succession plans for your property investment company
Protect your property legacy for a lifetime and beyond
Ways to Purchase Property
There are many ways a property company can be set up, but the most tax efficient and protected for a lifetime-and-beyond solution is via a Family Investment Company (FIC).
By buying investment property in your personal name, you would be liable for up to 45% in income tax. Buying property through your trading company is more tax efficient, however, there are strict HMRC rules surrounding investing company profits, which, if breeched, could put you at risk of losing Business Property Relief and incurring a 40% tax penalty (see the next point for more details).
For those looking to hold property or build a property portfolio within a tax-efficient environment, the Family Investment Company is an ideal option. By creating this structure, you are able to take advantage of property market growth alongside the tax benefits offered by the FIC. It also means you retain control of assets, but they are in trust and outside of your estate should the worst happen, saving on inheritance tax for your family.
Using a Family Investment Company facilitates other substantial tax savings as any profits made from assets within the FIC are only liable for Corporation Tax, as opposed to Capital Gains or Income Tax, as would otherwise be the case.
Moving Excess Retained Profit
If you have a trading company, directors can move excess profits from it into the Family Investment Company. This protects your trading company from inadvertently becoming an investment company which can happen if you are seen to be investing cash above the HMRC threshold, or by holding too much surplus company cash beyond what is needed to run your business. In addition, by lowering your trading company’s year-end balance sheet, you can also reduce the Corporation Tax due on it. The FIC allows you to keep your business separate from your investments, and ensures you retain Business Property Relief.
After moving your company’s retained profits, you can use these (plus the freed-up funds you would have otherwise paid in tax) to invest in further property, allowing you to continue accumulating your wealth in the most tax-efficient manner.
The inheritance advantages of creating a company for your property investments are key for many of our clients. A Family Investment Company protects company shares, outside of the estate and outside of the trading company, meaning that if the worst happens, your children are not liable for inheritance tax on the company shares and this, its assets.
The FIC is ideal if you want to avoid a large inheritance tax liability for your family but want to retain control over the assets and management of your portfolio. This is especially advantageous for those who are just starting their property investment journey, who are unlikely to pass away anytime soon, but have the foresight to protect their young families should the worst happen unexpectedly. It is a very straightforward and cost-effective layer of security.
Compared to more traditional trust arrangements, the Family Investment Company provides more flexibility whilst safeguarding assets and ensuring your family is looked after both during your lifetime and beyond.
Maintaining Full Control
As the founder of the Family Investment Company, you retain full control of the company and the assets/funds within it. Rules are in places to allow family members or other beneficiaries to be part of the Family Investment Company, but without any decision-making ability unless dictated. Directors can pay dividends from the Family Investment Company profits, as form of income. Benefits can also be paid to other members, should you decide.
The flexibility of the FIC means that it can be tailored to suit individual circumstances and altered over time as desired – for example, any changes to the family structure (i.e. divorce or new members) can be replicated within the FIC. A big advantage is that you can protect your family wealth, should the worst happen, but can also move your funds around and invest them as you see fit.
How To Set Up A Property Company
To ensure the best and most efficient setup of a property company is advisable to have expert support. This ensures that the correct strategy is created, prior to setup and the Family Investment Company is created with the desired strategy at the forefront. The Family Investment Company then needs to be registered with HMRC and for its own bank account to be created, from which you control how money is invested and funds managed. Various share and trust documents need to be put in place, finalising the beneficiaries of the FIC and ensuring a full understanding of the mechanics of the strategy.
A FIC is an extremely tax efficient property company structure. It can also be combined with additional tax planning products, such as a Small Self-Administered Scheme to provide even more advantages, such as pension planning, ring-fencing of assets and additional wrap-around manoeuvrability for your property investment strategy. Again, understanding how this could work for your individual situation is paramount, so it is advisable to research and employ expert support for the setup of the structure. Once in place, these types of property company can provide extensive options for you, your business and your family.
At TLPI our consultants are experienced in property, investment strategy and pensions. We are registered with HMRC to set up Family Investment Companies and SSAS pensions. Book a call today to find out how TLPI can help you achieve your property investment goals.
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Based on 67 reviews
We have recently used this excellent company to set up a Family Investment Company. The complete process was seamless with our personal contact Jordan Sharpe explaining all the steps along the way in a very confident and professional way. They really do deserve this 5 star review.
Tlp have been fantastic with there advice and help in setting up my retirement plans , putting structures into place to help with future generational hand over of assets, great advice from Jordan Sharpe, easy to deal with and always on hand for help when needed, well done all, 👏 ✔️
Trustworthy Financial Advice with an Eye on the Future. I recently sought financial advice, and trust was my top priority. TLP not only met my expectations but exceeded them. Although their product didn't suit my current needs, their dedication to providing comprehensive information and support left me confident in utilising their services in the future. TLP's commitment to customer satisfaction was evident from the moment I approached them. They patiently and thoroughly discussed all available options with me, ensuring I understood the pros and cons of each. Despite not making an immediate sale, they generously shared their time and expertise, demonstrating a genuine interest in helping me make the right decisions. What impressed me the most about TLP was their transparent and honest approach. They didn't try to push any product on me that wouldn't serve my current financial situation. Instead, they focused on empowering me with the knowledge I needed to make informed choices. Their willingness to prioritise my needs over immediate profits spoke volumes about their integrity. I left my interaction with TLP feeling informed, confident, and assured that when the time is right, they will be my go-to financial advisory service. The trust they have established with me through their professionalism, dedication, and genuine care for my financial well-being is unparalleled. I have no hesitation in recommending TLP to anyone seeking trustworthy financial advice.
I was looking at setting up a Family Investment Company, during which I’d paid more than a few hundred pounds for a couple of Consultations. After which I’d received some rather expensive quotes for setting it up, as well as getting lots of complexed information about the process.
Then I eventually stumbled across TLP while doing some related research. I was pleasantly surprised and more than pleased that they offered a No cost consultation. During which Lewis Jones, was able to simplify all the information and subsequently provide a much more realistic quote for the process. Not to mention the first year’s company accounting services that came for free and the ongoing advice from Lewis. Which has not only been financially beneficial, but as proved to be a great source of knowledge and education, responding to all my questions promptly. With my background not being in the financial and investment sector, his clear explanations put in a context that I was able to understand, has been invaluable.
Great support all the way through the process very professional good knowledge and friendly service. I would highly recommend
From the start of the transfer to the end TLP have been always available to me, they have kept me informed throughout the process and offered help and guidance when required. Excellent service that is highly recommended
Now fully set up with a Landlords pension and very pleased with the overall service. Only delays were with AVIVA not playing ball but now all done and set to earn significantly more than with AVIVA. Jordan Sharpe was knowledgeable and guided me through the whole process with a professional and friendly approach. Morwena (assistant) was again very friendly and together made the process a simple one. Looking forward to a better retirement (eventually) thanks to TLP.
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