How can a Family Investment Company (FIC) be used for inheritance tax planning?
- Friday, March 8, 2019
Author: Alison Palmer
Wealthy individuals and families are seeking alternative routes to trusts to pass on their wealth tax efficiently. With corporation tax rates being relatively low currently and set to reduce further, many are considering the opportunities a FIC presents in terms of succession planning.
What is a FIC?
A FIC is a private company, registered in the UK. The company is usually set up as a FIC from the outset with current family members as shareholders. It differs from a standard company in that the transfer of shares outside of a specified level of family connection is generally prohibited by the company constitution – the Articles of Association. This provides a key layer of protection by ensuring that control of the company is kept firmly within the family, while the existence of different classes of shares can preserve flexibility over the distribution of funds.
What are the benefits?
In many circumstances a FIC can prove a tax-efficient inheritance tax planning solution for families. The potential benefits for a trading company include:
What do I need to consider?
Whilst there are benefits to a FIC, there are also a number of considerations to be aware of:
There are significant complexities involved which need careful planning to achieve the desired result.
If you would like to discuss whether a FIC could be a suitable option for you and your family, please get in touch.