Most investment companies are registered with the SEC under the ICA. Read more about FICs and Family Businesses Here —>, Your email address will not be published. The key advantages of a family investment company include: The result is that the FIC will have more post-tax income available to reinvest and generate further income and capital growth than if investments had been held by individuals or trustees. A Family Investment Company (FIC) is a private limited company with bespoke articles of association, where the shareholders are family members. From that date management expenses are available to any ‘company with investment business’. As an ordinary UK resident company, a PIC can hold a wide range of investments, such as cash deposits, share portfolios, investment funds and rental properties. Stamp duty and corporate transactions – what has changed? You have a tax free dividend allowance of £2,000. Your email address will not be published. How much Capital Gains Tax is paid beyond this depends upon the holder’s income tax band. Additionally, profit from your investments will be subject to the lower corporation tax rather than the higher rate income tax. Any dividends that exceed your allowance will have dividend tax deducted based on the tax band you fall into: Nature of your enquiry? ---Buying/ Selling a CompanyCompany reorganisationProperty TaxResearch & Development TaxExpanding OverseasEIS/SEISCapital AllowancesVATCapital Gains TaxTax on CryptocurrencyInheritance Tax PlanningNon-domicile or non-resident taxTrustsPension SchemesEmployee Share SchemesExpat TaxTax InvestigationsOther, How did you find our website? This is a relaxation of the previous provisions where a company had to have a business that consisted wholly or mainly in the making of investments. Like this article? Enterprise Tax Consultants and its employees presume that you have sought independent financial advice prior to requesting their services and cannot be held liable for any losses arising as a result of pursuing a course of action as requested by you, your business or your financial adviser. Visit GOV.UK for more information on Capital Gains Tax. For many families, trusts will remain the most flexible wealth planning vehicles; however, FICs come into their own where the value of the assets to be transferred are such that they would be subject to an immediate 20% lifetime inheritance tax charge. Further protection against the transfer of the shares outside the immediate family such as the requirement for shareholders to enter into pre-nuptial agreements could be included in a shareholder agreement. 1st Floor, Market Court, 20-24 Church Street (via Garden Lane) Altrincham, Cheshire, WA14 4DW. There are no special tax exemptions or reliefs for Family Investment Companies. We use this information to make the website work as well as possible and improve government services. Dividends will be subject to tax at the appropriate marginal rate (7.5% for basic rate, 32.5% for higher rate and 38.1% for additional rate taxpayers). Rather than contribute those funds to a trust, which could result in immediate charges to inheritance tax, he incorporates a new company, with different classes of share to be held by various members of the family. This can be especially attractive for creating a pot of income that might be used to provide distributions to family members who are not named shareholders in the FIC. In contrast, individuals are not eligible to claim tax relief on the expenses of managing an investment portfolio. Shares in a family company might therefore be transferred into trust prior to the sale of the business to a third party – but before there is any binding contract for sale – and the value passed into trust without any immediate charges to inheritance tax. The Enterprise Investment Scheme (EIS) offers 30% income tax relief on up to an annual £1 million investment in qualifying companies (£2 million where any amount over the basic £1 million limit is invested in qualifying ‘knowledge-intensive’ companies). Relief is available for expenses incurred in managing the company’s investments and running its business. It will take only 2 minutes to fill in. The mortgage interest relief restriction applying to individuals and trustees also does not apply to companies and therefore a family investment company. The articles can prevent a transfer of shares other than to certain family members or family trusts and the value of the shares will further be reduced by the restrictions in articles and shareholder agreement. Unlike a trust, Relief is available to the company for interest on any loans it takes out against the value of its investments whereas, in contrast, individuals and trustees are not eligible for tax relief in respect of interest on loans to acquire investments. The investment income requirement (i.e. The value of the loan would fall outside of the founder’s estate after seven years.