What is a Family Investment Company or FIC?
In many ways, a FIC is nothing more than a company which holds a pool of investments for a family. Now that trusts are not tax-efficient, a FIC can offer the same sort of structuring but without the tax costs. A FIC also offers tax advantages of its own.
The investments in the FIC are taxed at the corporation tax rate, currently 19%, which allows investments to be rolled up at a reduced tax rate as compared to holding the assets personally.
A FIC can be created with different classes of shares, A, B, C, etc, and each of those classes can have different rights. The A shares could be held by the parents, and have voting rights so they have control of the assets. The remaining shares could be held by the children ( who must be over 18) and they can be paid dividends at different rates determined by the parents.
A FIC has the filing obligations of a normal company, and the information will be visible at Companies House, but only to a limited extent whilst it is still filing micro company accounts.
A FIC can be funded by way of a loan, allowing for profits to be extracted free of tax by drawing down on the loan account, rather than paying dividends or salaries.
It is also possible to structure the shares to pass value in the company to the next generation over time without triggering capital gains tax or inheritance tax charges.
A FIC is therefore a powerful tax planning tool where the situation is right.