Matthew Evans

Matthew Evans
Executive Director

A Family Investment Company (‘FIC’s’) is widely regarded as the vehicle of choice for high-net worth families who wish to safeguard and grow their wealth across generations. Particularly, for those families who are already comfortable with running a business. 

The allure of the family company lies in its flexibility and the control it offers over family assets, providing a structured approach to transfers of wealth between generations and allowing for the distribution of profit and capital in a tax efficient manner.

Recognising that each family is different, a family investment company can be tailored to the needs of that particular family.  With the opportunity to create different classes of share, each with diverse voting powers and capital entitlements, plus the use of bloodline clauses and other anti-divorce planning, there is no “one size, fits all”.

Understanding the options available is therefore of paramount importance. Our proactive tax team are at the forefront of assisting high net worth families establish their family investment companies.

Do you work with FIC clients?

As one of a client’s trusted advisors, what do you need to know when your client wants to establish a FIC?

If you are the investment manager, you need to understand the tax consequences of your investment strategy. They may be different from other “wrappers” and ownership structures that you already use.  Is there a difference between an income strategy and a capital growth strategy? If so, what should you be doing to minimise the end tax result, including the use of other wrappers within the FIC?

If you are the accountant, you need to understand the annual reporting requirements, the reporting standards and how much your client can extract from the company tax efficiently every year, etc.

Finally, if you are the lawyer, you need to understand what other structures/vehicles need to be drafted that sit nicely alongside the family investment company. How you might draft supporting trust deeds, the FIC articles, a family constitution, the wills, and the family pre-nuptial agreements, etc.

Evaluating options – the TaxNav case study

Our case study for the next TaxNav session will focus on an individual who had just received a life changing sum from a business exit. Where even as a minority shareholder, the amount was in excess of £20m.

Different advisors had already talked to him about alternative ideas: his IFA wanted him to invest in a Bond and his lawyer wanted him to explore Trusts.  Both these ideas carried merit, but were not ideal due to other circumstances.

We considered a number of opportunities other than family investment companies, as well as showing the client a number of different options for how different FIC’s might be established.

In the case study, we will explore the process we went through with the client, the eventual solution, and the cost to benefit analysis for the client.

In addition to this, we will also cover how the other advisors got involved in the design, implementation and administration of the FIC.

What next?

By embracing structured planning and leveraging the expertise of our distinguished tax professionals for step-by-step guidance and implementation support, families can preserve their legacy while navigating the nuances of tax law with confidence, to live life tax efficiently and maximize the value of their hard-earned assets.

If you are involved with clients interested in establishing a family investment company, contact us today and follow this link to find out more information, and sign up to our next online Tax Nav event, on 11th July at 10:30am.