Date posted: 16th Jun 2025
Sometimes seen, as an alternative to a trust, Family Investment Companies (FICs) are once again emerging as a popular planning vehicle among wealthy families looking to preserve and grow intergenerational wealth.
With the ongoing freeze on inheritance tax thresholds and complications over trust structures, many high-net-worth individuals are turning to FICs as a flexible and tax-efficient alternative to traditional trust arrangements.
What Is a Family Investment Company?
A Family Investment Company is a private limited company established by individuals to hold investments, such as:
- Shares and securities
- Property portfolios
- Cash and other assets
Ownership of the FIC is structured via shares held by family members, enabling parents to retain control (often through voting rights or director positions) while gradually transferring economic value to children or other beneficiaries.
Why Are FICs Gaining Popularity?
FICs offer a compelling combination of asset protection, control, and tax efficiency. Some of the key benefits include:
- Corporation tax treatment: Investment income and capital gains are taxed at the current corporation tax rate (typically lower than personal tax rates on the same income).
- IHT planning: Growth in value can be passed to the next generation via shares, reducing the taxable estate of the founders over time.
- Control retention: Founders can remain as directors and maintain control over investment decisions and distributions.
- Flexibility: FICs allow for tailored share structures, director appointments, and shareholder agreements to reflect the family’s succession strategy.
- No upfront IHT charges: Unlike some trust structures, FICs do not usually trigger an immediate inheritance tax charge on setup.
What to Watch For
While FICs have clear advantages, they are not without complexity. Careful planning is essential to avoid pitfalls, such as:
- Triggering tax charges on transfers of assets
- Failing to meet market valuation requirements
- Inadvertent benefit-in-kind issues where personal use of company assets occurs
Is a FIC Right for Your Family?
FICs are most suitable for families who:
- Have significant assets they do not need for immediate personal use
- Want to pass on wealth in a controlled and phased manner
- Are seeking long-term, investment-led growth
- Value corporate flexibility over trust rigidity
Final Thoughts
With tax policy increasingly uncertain and pressure on high-net-worth families mounting, Family Investment Companies provide a compelling tool to manage wealth efficiently while retaining control. Their popularity is only likely to grow as more individuals seek alternatives to traditional structures.
However, proper structuring and ongoing management are crucial to ensure that a FIC delivers the intended benefits without unexpected tax consequences.
As ever, we are here to provide advice.
