What is a Family Investment Company (FIC)? A FIC is a private limited company set up to protect family wealth, hold assets and mitigate tax within HMRC rules.
A Family Investment Company is set up similarly to any other company, but with different rules applied to ensure the company invests, as opposed to trades. It is also setup to the benefit of your family, although they do not make decisions; its setup is such that you are in total control.
Various rules and strategies dictate different ways in which the company works, saving tax and supporting innovative strategies, not suitable for implementation via your trading company.
Cash can be transferred to, and held within a Family Investment Company. Any profits that are made are then liable for corporation tax, as opposed to capital gains or income tax, as would otherwise be the case. This alone, creates significant tax advantages when compared with those of the individual. A Family Investment Company is at its most effective as part of a Lifetime Business Tax Plan, which can radically mitigate tax.
For business owners, the Family Investment Company is a more appealing alternative to a traditional trust arrangement, providing extensive flexibility and inheritance tax advantages. It is a tax-efficient way to protect wealth, hold assets and pass them down through the generations. It also simplifies succession.
A Family Investment Company allows you, the company director, to maintain full control. This is dictated by the way the company is set up. All decisions and control of the company are managed by you, for example paying dividends. This could be as a form of income or to other members of the Family Investment Company. Other members are not decision makers. The Family Investment Company is flexible, meaning that it can be tailored to meet your individual situation and altered with time, as necessary and as you decide.
If you are looking at purchasing a Buy-to-Let property portfolio then a Family Investment Company is the ideal vehicle. This puts your assets within a tax-efficient and ring-fenced environment, protecting you and your family from excessive tax implications. Business owners and their families can take advantage of property market growth, ensuring long-term advantages. This can also be coupled with a Small Self-Administered Scheme to further achieve tax efficiency, investment potential, and flexibility. Whilst you, the company director, retain control, should the worst happen you avoid leaving the extensive inheritance tax bill your family would be faced with, should you not have a Family Investment Company in place.
