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.
Exceptional advantages:
- 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.
Four reasons to move excess profits to a Family Investment Company
- To avoid your trading company being reclassified as an investment company by HMRC. This can happen where the company holds or invests cash beyond what HMRC considers appropriate for its trade.
- If HMRC treats your company as an investment company, you risk losing Business Property Relief on the value of your shares.
- Enhanced litigation risk. A trading company sitting on significant surplus cash is a more visible target for a claim, because a claimant can see there are funds available to meet it.
- Where Business Property Relief is lost, the value tied up in the company falls into your estate and is exposed to Inheritance Tax at 40 per cent.
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 improve tax efficiency across both structures and support long-term wealth growth. The outcome depends on your own circumstances.
Inheritance
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.
Maintaining control
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.
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 the assets while the shares carrying future growth can sit with the next generation. A Family Investment Company is not a trust. It is an ordinary private limited company, and how it is treated for Inheritance Tax depends on how the shares are structured and held.
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.
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