Family Investment Company Case Study


Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Case Studies & Examples; Setting Up a UK Family Investment Company…

FIC Case Study Background

Mr and Mrs Armitage ran (and owned 100% of the shares) a successful construction company for many years. For Inheritance Tax purposes, this was incredibly efficient as the full value of the shares qualified for Business Property Relief.

However, following the sale of the business for £15m, they were sitting on a pile of cash and a concern over how to deal with their estate going forward.

Mr and Mrs A have two children and are interested in exploring the potential of setting up a FIC.

Setting Up a Family Investment Company – Case Study – Example

Mr and Mrs Armitage set up a new UK Company called Armitage Investments UK Limited. This entity will act as a FIC.

They seed the new FIC with cash. This could be in the form of, say, either:

  • interest-free loans; or
  • by subscribing for preference shares.

Any such funding will not be a transfer of value for inheritance tax (IHT) purposes. In addition, these funds could be extracted from the company by the Armitage’s in the future tax-paid. The parents will also subscribe for voting shares in Armitage Investments UK and be Directors of the Company. This will give the Armitage’s control of the company at both the shareholder and at the board level.

It might also be desirable for the Company to create classes of non-voting shares. These might be given to the Children. This gift of the shares will not be subject to IHT on the proviso that the parents survive for seven years from the date of the gift.

Alternatively, the shares that are gifted to the children might only participate in future capital growth. These so-called growth / flowering shares would have a low initial value and therefore there should be little issue with the transfer of the shares to the Children.

One might also consider the transfer of such growth shares to a trust for the benefit of the Children. As the value of the shares would be low then there should be limited issue with the transfer to the trust being a chargeable lifetime transfer.

The above is simply and example of what could be achieved with a FIC. However, no two cases are the same and advice should be obtained suitable to individual goals and objectives.

Please see our full Signpost document regarding Family Investment Companies for more information on these vehicles.

If you have any queries about this Family Investment Company case study, or FICs in general, then please get in touch.

Family Investment Company case study was last updated on 16 December 2019

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