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Over the last few years, Family Investment Companies (FICs) have become a popular alternative to trusts as a tax efficient structured investment vehicle. This is particularly relevant to clients who roll up and reinvest the income and gains generated by their investments.
For the right person and in the right circumstances a FIC can prove to be an effective estate planning tool, enabling families to pass on wealth in a controlled, flexible and tax efficient way.
They tend to work best for those with substantial capital to invest, (at least £1m) for the tax structured finance to be cost effective, and for those who are willing to park funds in a company for longer term tax efficient growth. It is less appropriate for those who wish to continually access the funds.
We have considerable experience in helping clients plan, develop and implement FICs to meet their unique family circumstances. Working in conjunction with investment advisors and bankers, we have recently helped several families plan and set up ‘bespoke’ structures to move wealth to family members. Although each family business tax structure was tailored to meet particular needs, but the underlying theme in each case was our ability to significantly reduce the family’s exposure to income tax and IHT. By helping reduce tax rates and providing a facility to offset costs, such as investment management charges and interest charges, we helped to maximise investment returns (compounding) by ensuring that they are not eroded by tax as they otherwise would have been if conducted personally or via a trust.