Family Investment Company vs. Trust – Tax Compassion
Setting up a Family Investment Company or a Trust – Comparison & Background
This article sets out a side by side comparison of the Family Investment Company v Trust.
|Family Investment Company (“FIC”)||Traditional Trust structure|
|Who’s calls the shots?||The FIC is managed and controlled by its directors, who are usually the family (unless a non-UK resident FIC).||The trust is controlled by the trustees who may, or may not, be the family. Again, where there is a non-UK trust the trustees are unlikely to be family members.|
|Who may benefit from the assets?||The net value of any assets held by the FIC is owned by the shareholders.||The trustees hold the assets comprised in the trust fund for the beneficiaries.|
|What payments may be made?||The interests of the shareholders will be set out in the company articles. This will ‘lock in’ the various entitlements to income and capital and, also, any voting rights attached.|
Generally, speaking, it is difficult to replicate the same discretion that trustees will often have in relation to a family trust.
As such, the type of payments that can be made may be fixed at the outset and any changes might require a change to the articles of the FIC.
|Generally speaking, in the context of a family trust, the trustees will have discretionary power. As such, the trustees will have discretion over whether payments are to be made, how much and to whom.|
|Internal regulation||As alluded to above, a FIC will be governed by its articles and any agreements made by the shareholders.|
The articles of a company, depending on the jurisdiction, may be a public document. As such, to provide an element of privacy, certain matters might fall to be dealt with in a shareholder’s agreement.
|The ‘nuts and bolts’ of a trust are set out in its deed (and generally also with a letter of wishes).|
Neither of these documents will be public ones.
|External regulation||The FIC will be covered by Company Law in the relevant jurisdiction.||The trust will be covered by trust law which is highly developed.|
|Registration requirements?||A UK FIC will need to be registered at Companies House which is freely searchable by any person with an internet connection.|
If one wants to protect one’s information from prying eyes then one might look at other jurisdictions, where such registers are not freely searchable
|At present, trusts must register with HMRC where there is a UK filing position.|
Please see our full Signpost document regarding Family Investment Companies for more information on these vehicles.
If you have any queries regarding Family Investment Company v Trust, or FICs in general, then please get in touch.
Family Investment Company v Trust was last updated on 16 December 2019