Leave a legacy to be proud of and maximise the wealth you leave behind for the future generations by setting up a Family Investment Company.
When all is said and done, what really matters more than the legacy you leave behind for those you love the most?
Inheritance tax is at an all-time high, and in some cases nearly half of all the wealth you have worked so hard to accumulate will be taken away from your family if you simply leave them your assets in a will. Even if you set up a trust, you will still need to pay 20% on any assets over the first £325,000, and deal with some eye watering income and capital gains tax rates.
This simply isn’t fair, but there is a better way. Accountants Plus offer expert estate and tax planning advice to individuals looking to pass as much of their wealth as possible to those who matter to them the most.
A better way – Family Investment Companies
Family Investment Companies are a fantastic way to do just that, allowing for wealth to be passed between generations in the form of shares in a Private Limited Company where wealth is moved into the company rather than directly passed to individuals.
We will not only help you to reduce inheritance tax but will consider all the potential tax consequences of a Family Investment Company including potential corporation tax relief, business property relief, Income tax relief and much more.
You’re going to be around for a long time yet, but it is wonderful to know that when the time does come, you have set your family up for a successful and comfortable future.
What is a Family Investment Company?
A Family Investment Company is a Ltd Co (Private Limited Company) where the majority or all of the shareholders are family members.
The founders of the Family Investment Company, usually the parents, will receive shares and loans in exchange for any cash or non-cash assets they transfer into the company.
After seven years has passed, these shares can be gifted to family members without any inheritance tax consequences.
The founders usually retain all the voting rights within the company, ensuring you keep control over your wealth at all times, whilst other family members (usually children) become shareholders and will hold the shares with dividend entitlements.
Any capital growth within the FIC Family Investment Company will, therefore, occur in your Children’s names.
There are still some tax implications to consider, you will need to pay corporation tax, for example, but that is far less significant than the alternative. Our expert team may even be able to reduce that by helping you claim for deductions on interest on loan utilised for business purposes.
In the right circumstances, a Family Investment Company is an incredible tool for building family wealth for generations to come.
Why choose Accountants Plus for FIC Advice?
We don’t just help clients set up Family Investment Companies, we build bespoke business wealth strategies to help you and your family keep as much of your wealth as possible throughout the generations.
We will often combine our Family Investment company services with other support and advice on the tax efficient accumulation of wealth including the Potentially Exempt Transfer of assets, corporation tax rate deduction eligibility, and much more.
Family Investment Companies vs Trusts
Historically, trusts have been the most popular way for parents to retain control over their wealth whilst reducing the inheritance tax taken on their wealth when it is passed to their children.
However, trusts were made less attractive than Family Investment Companies in most instances by a change to their taxation.
Trusts remain an option worth considering where the value of the assets being transferred are less than the IHT Nil Rate Band, where assets qualify for IHT Business Property Relief, when a chargeable gain has accumulated within the asset to be transferred, in circumstances where it is important to protect the transferring asset against drifting out of family ownership due to divorce or bankruptcy, and where families want to retain the flexibility to include potential beneficiaries from future generations.
Because Family Investment Companies are less well known than trusts to most business owners, we will concentrate here on Family Investment Companies, but we will consider both options when we meet with you to consider detailed plans for your family.
Do you have to pay inheritance tax on a FIC?
Not if it has been set up properly. Family Investment Companies are an excellent method of maximising the wealth passed between generations, and minimising inheritance tax is a big part of this.
When you die, any assets such as cash or property left to your children or grandchildren will be taxed up to an eye watering 40%, limiting the legacy that you have worked so hard to leave for the future generations.
However, if these assets are instead transferred to the Family Investment Company, the shares you gift to your children (after seven years) are not usually subject to inheritance tax.
There are other tax related benefits to FICs beyond inheritance tax purposes alone, including favourable tax treatment of dividends distributed to the shareholders, and potential corporation tax deduction on genuine business expenses.
This can change, however, if the company is not set up properly, or all the rules are not followed, and that is where we come in. Our expert tax planning team will make sure the company is set up properly and guide you through the entire asset transfer and share gifting process.
Limited or Unlimited Liability?
FICs are normally set up with limited liability due to the benefits this offers to shareholders, but it is possible to set one up with unlimited liability if deemed appropriate.
The big benefit of this is that unlimited companies have no obligation to file annual accounts with Companies House, adding an additional level of privacy.
To learn more about the benefits of limited vs Unlimited FICs, get in touch with the experts at Accountants Plus today.
Get Started with your Family Investment Company
When you come to Accountants Plus, you will receive our full business wealth and tax planning service, with highly experienced accountants analysing every possible opportunity for you to pass as much value as possible onto your future generations.
If this turns out to be a Family Investment Company, we will get started right away, handling the entire set-up process and walking you through each stage step-by-step.
Often, we collaborate with your corporate lawyer to tailor the documentation to the precise needs of your family.
Initial Consultation and Assessment
We care about our clients and will never recommend something we don’t truly believe will help them achieve their wealth goals. FICs are often the answer to your inheritance tax concerns, but there are other options out there.
We will carefully examine your financial position and listen to your goals before creating a bespoke strategy to help you achieve them.
Family Investment Company Setup
Structuring your FIC Family Investment Company so you can move as much wealth as possible whilst retaining complete control over your assets is the key, and we will help you do it.
We will manage the entire set-up process and create a customised Family Investment Company FIC strategy for your own personal needs.
Ongoing Support and Advice
Wealth planning is a long-term goal, and we are in for the duration. Any questions or concerns that you have during the set-up process, or once the FIC is up and running and our expert team of local accountants are just a phone call away.
