Family Investment Companies (FICs) have been in use since 2006 as a tool for tax planning among high-net-worth individuals. With upcoming changes to pension legislation and proposed reforms to inheritance tax, FICs are experiencing renewed interest.
In October 2024, the Government announced that, for the first time, unused pension funds and death benefits will be included in an individual’s estate for Inheritance Tax (IHT) purposes (subject to the legislation and rules), effective from April 2027.
As a result, we’re seeing a shift in the advice being given to clients around long-term tax planning. There is growing interest in making more substantial lifetime transfers, and regular reviews of IHT exposure are becoming increasingly important. In this evolving landscape, FICs are emerging as a potentially valuable component of revised estate planning strategies.
Why consider a FIC as part of your tax planning?
- A Family Investment Company is usually a private company whose shareholders are family members (or trusts), operated by a small number of directors.
- A FIC is a method of preserving wealth for future generations. It provides several tax benefits when compared to some other investment options.
- FICs are less vulnerable to changes to Inheritance Tax (IHT), and so help to create a more certain estate planning strategy
- FICs provide clearer routes to succession planning for wealth preservation for future generations.
Who is a FIC suitable for?
A FIC is suitable for anyone who:
- has assets of considerable value (typically those assets won’t qualify for IHT relief, such as cash);
- is interested in long-term wealth generation;
- is concerned about how their wealth will be handed down to the next generation; and/or
- is comfortable with operating their investments through a corporate wrapper.
- Does not need to benefit from the future growth in value of assets which they believe will appreciate in value.
FICs are sophisticated structures, and it’s essential to seek professional advice to determine whether they are appropriate for your personal circumstances. Your financial and/or legal adviser can provide detailed guidance on how a FIC works and whether it may be a suitable option for you.
If you would like to speak to one of our specialists, please contact Joanna Grewer or Lizzie Walters. Both have extensive experience in advising clients on the establishment and management of FICs and would be happy to answer any questions you may have.