The benefits of a Family Investment Company
By International Adviser, 30 Jul 18
People wanting to protect and maintain control of family wealth are increasingly turning to family investment companies. Ravi Francis, senior associate solicitor at Irwin Mitchell Private Wealth outlines the benefits and drawbacks of using such a structure.
The Founder of the FIC is the sole shareholder and director of a non-trading company that makes a variety of investments.
He wishes to transfer some of the profits to his two adult children in a tax efficient manner, while retaining control of the company’s investments.
One child (D) is a higher rate taxpayer, while the other child (S) is a basic rate taxpayer.
Two new share classes are created and resolutions are passed so the Founder holds “A shares”, which carry all the voting rights but no capital or income rights; plus “B shares” and “C shares”, which carry all the capital and income rights but no voting rights.
This will allow the FIC to declare dividends to one share class but not the others, if appropriate.
The non-voting B shares are given to S, while the C shares are given to D before they acquire significant value.
The gifts will only be liable to IHT if the Founder dies within seven years.
The FIC declares a dividend of £20,000 in respect of the B shares held by S who receives no other income in the 2018/19 tax year. The use of S;s personal allowance and dividend allowance mean only £3,150 is taxable at a basic rate of 7.5%.
Click through to the next slide to read about the key benefits of setting up an FIC.
Tags: Irwin Mitchell
