A Family Investment Company (FIC) is a private limited company set up to hold, manage and grow family wealth in a controlled and tax-efficient manner. In the UK, the FIC has become a popular alternative to traditional trusts, especially as tax rules around trusts have tightened in recent years.
The Basic Idea
In its simplest form, an FIC is created by parents or grandparents (the founders) who transfer cash, investments or other assets into a company rather than holding them personally. The company then invests those funds, for example, in shares, bonds, property or other long-term assets, with the aim of growing the family’s wealth over time.
The distinguishing feature is that the founders retain control of the company, while passing the economic benefit of future growth to their children or other family members. This is usually achieved through a division of share classes:
- Voting shares are retained by the founders, enabling them to make decisions and maintain control.
- Non-voting shares are gifted to children or held in trust for them, allowing them to benefit from dividends and capital growth without day-to-day decision-making.
Why Families Set Them Up
1. Control
Many families want to transfer wealth to the next generation but are reluctant to give up full control. A Family Investment Company allows founders to retain decision-making power while transferring future growth outside their personal estates.
2. Tax Efficiency
For a UK Family Investment Company:
- The Corporation Tax rate (currently 25%) can be lower than higher-rate personal income tax.
- Dividends received by a company from most UK and overseas shares are often exempt from Corporation Tax.
- Certain management or professional fees can be deducted as business expenses before tax.
- When profits are distributed as dividends to family shareholders, with careful planning these can be allocated to individuals in lower tax bands.
The MGroup’s Tax and Business Advisory Services help ensure the structure of your FIC remains compliant and efficient, particularly around how profits are allocated and taxed.
3. Inheritance Tax (IHT) Planning
By gifting non-voting shares early, parents can transfer future growth outside their estates for IHT purposes (provided they survive the relevant period). Because the FIC structure separates control (voting shares) from economic interest (non-voting shares), it avoids many of the risks associated with outright gifting.
The MGroup’s Personal Tax and Planning team can help you understand how an FIC fits within your overall inheritance and succession strategy.
4. Flexibility and Investment Control
A UK Family Investment Company can hold a wide range of assets, from property portfolios and listed shares to private equity. Directors (often family members) can decide how income and gains are reinvested, distributed or even lent back to shareholders.
With guidance from The MGroup’s Corporate Finance and Valuation specialists, families can manage investment decisions with confidence and ensure their FIC remains aligned with their long-term financial objectives.
Typical Structure
A common structure might look like this:
- The parents form a new limited company and subscribe for voting shares.
- They introduce capital (cash or investments) as a loan to the company.
- The company invests the funds.
- Over time, the loan can be repaid tax-free, while profits accumulate for the benefit of younger shareholders.
- The company’s Articles of Association or a shareholders’ agreement typically set out clear rules on dividends, share transfers and governance, helping to avoid future family disputes.
The MGroup’s Accountancy Services can assist with company setup, annual reporting, and ongoing financial management to maintain compliance and transparency.
Points to Consider
- Costs and Complexity:
An FIC must prepare annual accounts, file returns with Companies House, and meet Corporation Tax and record-keeping requirements. - Professional Advice:
Legal, tax and financial advice are essential at the outset, particularly when drafting share classes, shareholder agreements and loan terms correctly. - Double Taxation:
Profits are taxed within the company and again when paid out as dividends. Planning is needed to minimise this impact. - Disclosure:
Details of directors and shareholders are publicly available at Companies House, so privacy is reduced compared with a trust.
Expert Insight
“Family Investment Companies can be a powerful tool for long-term wealth planning, but they need to be set up with precision. Getting the structure right at the outset ensures control, flexibility and efficiency are maintained for generations.”
— Oliver Squire, Partner at The MGroup
“For families with significant investment portfolios, an FIC can often achieve many of the same objectives as a trust but with greater transparency and control. The key is understanding how it fits into your wider financial strategy.”
— Wendy Tatham, Partner at The MGroup
How The MGroup Supports Family Investment Company Planning
If you are considering setting up a Family Investment Company in the UK, The MGroup provides a suite of complementary services, including Accountancy, Tax Planning, and Corporate Finance.
By combining financial expertise with personal understanding, our team ensures every Family Investment Company is structured efficiently, compliant with regulations, and aligned with the family’s long-term goals.
In Summary
A Family Investment Company offers a structured, long-term method of managing and passing on wealth within a family while maintaining control of the assets. It combines the flexibility of a company with the estate-planning advantages of a trust, making it an increasingly appealing option for UK families with significant liquid assets or investment portfolios.
However, it is not suitable for everyone. The success of an FIC depends on careful setup, disciplined management, and ongoing professional oversight.
If you’d like to explore whether a Family Investment Company might suit your circumstances, please get in touch with our team before taking any action.
Meet the Team
You can learn more about Oliver, Wendy, and the rest of The MGroup team, whose expertise spans accountancy, tax and business advisory services. Their combined insight helps clients structure Family Investment Companies that work for today and for the generations to come.