What is a family investment company (FIC) in the UK?

A family investment company (FIC) is a private UK company created by families to manage and grow wealth in a tax-efficient way. With lower corporation tax rates and structured inheritance planning, FICs allow assets to be passed on to future generations while maintaining family control.

A family investment company (FIC) is becoming an increasingly popular way for families in the UK to manage, protect, and pass on wealth to future generations. An FIC is typically set up as a private UK company  incorporated under the Companies Act 2006, either limited or unlimited, where the shareholders are almost invariably entirely made up of family members.

For families looking to invest funds for the long term, an FIC can provide significant tax efficiencies, as corporation tax on profits is generally lower than personal income tax or capital gains tax. However, personal tax liabilities can arise when extracting funds from the company, making careful planning essential.

How a family investment company UK is structured and set up

An FIC can be established as either a limited or unlimited company. While unlimited companies provide greater privacy for shareholders, since they are not required to file annual accounts with Companies House, they do not offer the protection of limited liability, which can make them more complex.

FICs can be tailored to meet family goals and can be set up through various share classes, each carrying distinct rights over voting, profits, and assets on winding up. The structure chosen often depends on the assets being contributed and the level of control that primary shareholders wish to retain. These early decisions are critical to ensuring the FIC operates in line with the family’s long-term objectives.

Funding a family investment company UK

An FIC can be funded through cash contributions, transferring non-cash assets, providing shareholder loans, or using a combination of these methods. While transferring non-cash assets into the company may trigger immediate tax liabilities, shares in the FIC can be gifted to family members without incurring inheritance tax, provided the donor survives for seven years. To maximise these benefits, the transfer should ideally take place shortly after subscription, before any growth in asset value of the FIC.

Loans can also be an efficient funding method. They allow founders to access funds in the future, as the loan principal can be repaid without triggering additional tax, and interest may be charged  by the lender if agreed.

Taxation rules for a family investment company UK

FICs are subject to corporation tax, which ranges from 19% for profits up to £50,000 to 25% for higher profits. Companies earning between £50,000 and £250,000 benefit from marginal relief provisions, helping bridge the gap between the two rates. Where an FIC is considered a “close investment company”, the lower small profits corporate tax rate generally does not apply, and profits are taxed at the higher 25% rate.

When funds are distributed from the FIC, shareholders may face personal tax liabilities depending on how the profits are extracted. Before making any distributions, it is advisable to seek specialist advice to understand the tax implications for each family member.

Filing obligations and compliance requirements

As private companies, FICs must comply with standard reporting obligations, including submitting annual confirmation statements and keeping company information accurate and up to date. Corporation tax filings are also mandatory, and depending on the chosen structure, annual accounts may need to be filed with Companies House. Families should ensure that governance, shareholder agreements, and decision-making processes are carefully documented to avoid future disputes.

The benefits of a family investment company UK

For families with significant investable wealth, FICs provide several potential advantages. Lower corporation tax rates on retained profits can make them an attractive vehicle for growing wealth. They also provide greater control over how assets are managed and distributed, allowing founders to separate economic ownership from decision-making power.

Additionally, when shares are gifted effectively, the FIC can support long-term inheritance tax planning. If the donor survives seven years after making the gift, those shares are usually outside the estate for inheritance tax purposes. This makes FICs particularly effective for passing wealth to the next generation while maintaining control and flexibility.

Get in touch with our private client specialists

FICs are a powerful tool for structuring family wealth, but they are not suitable for everyone. Before setting up a family investment company in the UK, you should seek advice from private client specialists, accountants, and tax advisers to ensure the structure aligns with your financial goals and long-term succession plans.

At Rayner Essex, we work closely with families to design bespoke investment structures tailored to their needs. To find out more about how an FIC could benefit your family, please get in touch with Marina Trinchese, our Private Client services specialist today or James Hadley, our Corporate Tax Manager.

You can also explore more about wealth planning and tax-saving opportunities in our Private Client Services or read our take a deep dive into our latest tax insights and news.

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