Family investment Companies

A family investment company (FIC) is owned by family members or trusts that hold a range of investments. It is managed by its board of directors, who are usually the parents.

A FIC can be used to transfer value to other generations tax efficiently, while the parents retain a degree of control over the assets in the company and access of the recipients to that value.

Who should consider creating a FIC?

A FIC is one option to consider where families have a material level of investments on which the income and gains would otherwise be taxed at higher income tax rates if held personally. 

FICs are also relevant where a family is looking to mitigate the long-term impact of inheritance tax as part of a broader succession plan. 

How are Family Investment Companies used?

A FIC can help a family to meet its wider goals, whether they be linked to consolidating family investments, helping a family to achieve tax-efficient succession plans, or helping to meet the family’s cash flow needs over a period of time.

With investments held within a FIC, it is possible for the family to control when and how taxable income is drawn down from the FIC by the family.

FICs have gained popularity following changes to the tax treatment of trusts in 2006, and are supported by a favourable tax regime for companies.

While there are a number of tax advantages for FICs, as compared to holding investments personally, or via trusts, it is important to ensure that a FIC is fully aligned with a family’s broader plans. 

What are the tax benefits?

There are two main tax benefits of FICs -

1. Inheritance tax: On formation, shares can be transferred to family members without incurring any immediate inheritance tax. After seven years the full value of the amount transferred falls outside of the founder’s estate. The capital growth then accrues outside of the founders estate.

There is a secondary inheritance tax benefit, in that minority shareholdings in the FIC can be discounted when valuing them for inheritance tax purposes on death, so reducing the inheritance tax that would otherwise be payable if the investments were directly held by the individual.

2. Tax efficient reinvestment of income: Most dividends received within a FIC should be tax-free, with any other income and gains subject to corporation tax (currently 19%).

A deduction for investment management fees (and other expenses) can also be claimed against taxable income in the FIC.  

This tax efficient environment can enable a FIC to reinvest more of its income, thereby accumulating greater value over the longer term. This can compare favourably to receiving the same investment income by an individual or trust, where income tax rates are higher and fees cannot be deducted against income. 

How is a FIC structured and how is it funded?

A FIC is no different to any other UK company and there is flexibility to have different share classes in a FIC, with varying rights to votes, dividend income and entitlement to capital value.

This flexibility offers opportunities to create a FIC in a way that is aligned with a family’s long term goals, albeit within the confines of various tax requirements. 

If a FIC is established with the intention of accruing value for a younger generation, or to a family trust, the children and trust could hold a share class which benefits from the capital growth, whereas the parents creating the FIC may hold shares with limited or no exposure to any increase in value.

The shares held by the parent could, however, hold all of the voting rights, giving them control over the company.

The FIC is often funded by family members making loans to the FIC, as these can usually be repaid tax-free when funds are available. This can provide an alternative source of tax-free cash flow for the family.  

Furthermore, the loan owed from the FIC to the founders might be gifted by them to the next generation at an appropriate time, without triggering any immediate inheritance tax implications. The value of the loan transferred would fall entirely outside the scope of inheritance tax after 7 years.

The company could be either a limited liability or unlimited liability company, with each having differing levels of public visibility and liability for its shareholders.

How can we help?

• We support families to explore whether a FIC may help them in achieving their longer-term goals.


• We can model the tax and financial implications of creating a FIC, understanding the benefits, costs and broader implications.


• We liaise with your lawyers to help you to create the agreed structure. There are a number of interrelating tax rules that need to be taken into consideration.


• When the FIC is formed, we work with our family clients during the year to ensure the FIC is being used as effectively as possible, bringing the FIC into wider conversations regarding governance, investments and succession.


• We can act as the registered office for the FIC and provide company secretarial services, alongside our work preparing year-end accountancy and tax services to the FIC.

If you would like to discuss how a FIC could be used in your particular situation, please contact a member of our tax team for a discussion, or your usual Bishop Fleming advisor.