Why you need a Family Investment Company
Take control, secure assets, grow and protect wealth, mitigate tax
We explain ‘why you need a Family Investment Company (FIC)’:
The FIC offers a structure that allows you to secure your lifetime wealth, grow the business and pass on wealth with optimal tax efficiency, whilst still maintaining full control.
- For creating powerful business strategies to reduce tax liability
- For the tax efficient purchase of buy-to-let or other investment property
- For business owners looking to invest and grow profits without excessive tax risk
- For streamlined succession planning options for family businesses
- For planning growth strategies and opportunities for entrepreneurs
- For mitigating inheritance tax
- For protecting and passing on assets and wealth
The FIC has become increasingly popular in the last decade, due to the enviable environment it creates for ensuring tax efficiency whilst still maintaining control.
For successful company owners who are making a profit, the protection of that wealth is essential. However, it is also important to consider your IHT position, regardless of age, to both support your own lifetime tax strategy as well as reduce its impact should the worst happen.
5 reasons to move excess profits to a Family Investment Company:
- To avoid inadvertently changing your trading company to an investment company in the eyes of HMRC.
- This can occur if you are seen to be investing cash above the threshold deemed appropriate by HMRC or
- if you are holding cash more than the amount HMRC see appropriate for your company’s trade.
- If HMRC deem your company an investment company, then you risk losing Business Property Relief
- Enhanced litigation risk, people may sue because has plenty of cash
- Subject to inheritance tax, should the worst happen
The Family Investment Company has become increasingly popular in the last decade, due to the enviable environment it creates for ensuring tax efficiency whilst still maintaining control.
For successful company owners, making a profit, then the protection of that wealth is essential. However, it is also important to consider your IHT position, regardless of age, to both support your own lifetime tax strategy as well as reduce its impact should the worst happen.
How does it work?
Cash or assets can be transferred to and held within a Family Investment company and any profits that the FIC makes 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 savings when compared with those of the individual.
For those who also wish to integrate even greater tax efficient strategies, grow the retirement fund or create innovative investment strategies, the Family Investment Company, when coupled with a Small Self-Administered Scheme (SSAS) pension can even more radically mitigate tax, grow your wealth and in some cases bring certain liability down to 0%.
For business owners, the Family Investment Company is a more appealing alternative to a traditional trust arrangement, providing extensive flexibility and inheritance tax benefits. It is a tax-efficient way to protect wealth, hold assets and pass them down through the generations.
One of the questions people ask, when setting up a Family Investment Company is, Who is in charge? The answer is that you maintain control of your trading company and the FIC. 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 you dictate this. Money and assets can be transferred in and out at your discretion, for example to pay dividends from its profits, as form of income. Benefits can also be paid to other members, should you decide. The Family Investment Company is flexible, meaning that it can be tailored to meet your individual situation and altered with time, as necessary, for example, if changes happen within the family (divorce, new births, marriages)
Using a Family Investment Company to hold property
A Family Investment Company is ideal for those looking at building a property portfolio or holding property within a tax-efficient strategy. For example, you may wish to purchase buy-to-let property. 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.
Combining your Family Investment Company with a Small Self-Administered Scheme (SSAS)
The Family Investment Company, at its most powerful, can be used as one element of an even more powerful ‘Lifetime Business Tax Plan’. When coupled with a SSAS, formidable strategies can be created to mitigate tax, protect wealth, invest in property, grow the business, facilitate streamlined succession plans, create your desired retirement goals, all within a secure and ring-fenced 360o environment. This gives ultimate control to business owners and families and the flexibility to ensure that wealth is protected and continues to grow for generations to come.