A family investment company typically holds and manages a family’s investments. Often the primary objective is to protect and pass the family’s wealth down the generations whilst minimising inheritance tax. Before 2006 it was much more common to use trusts to do this in the UK. But tax changes introduced that year led to alternative strategies being developed. Family Investment Companies (FICs) became a popular option – in the right circumstances.
Then in 2019 HMRC set up an internal unit to research the use of FICs due to concerns about unacceptable tax avoidance or even tax evasion. Just over 2 years later, in summer 2021, HMRC announced they were closing the research unit. They say they found “no evidence” of a correlation between those who set up FICs and “tax avoidance”.
The research concluded that the wealthy were using FICs as a “planning strategy, often with the primary objective of generational wealth transfer and mitigation of inheritance tax.”
This is good news for the wealthy and for their advisers. FICs have become increasingly popular since 2006 when tax changes made trusts less attractive as a route to secure the same primary objectives. This is because of the adverse tax charges that can apply to such trusts.
It seems clear to us that FICs are being used very much to avoid those additional tax charges. And that HMRC deems this to be acceptable tax avoidance and Inheritance tax mitigation – as long as those involved are fully compliant.
Our Network includes specialists in advising on FICs. You can choose who to approach and do so without giving us your details or paying a penny.