Family investment companies, explained

An alternative to a trust for passing wealth down — how it works, who it suits, and what it asks of you

A family investment company (FIC) is a private limited company used to hold and grow family wealth and pass it to the next generation. For larger estates it is increasingly used as an alternative, or a companion, to a trust. This note explains what an FIC is, why people use one, and the duties and costs that come with it. It is general information, not advice on your circumstances; advice on whether an FIC suits you is given separately, in writing.

What a family investment company is

An FIC is an ordinary private company whose purpose is to hold investments — cash, shares, and often property — rather than to trade. The parents usually put in the initial funds (commonly as a loan, which can be drawn back tax-efficiently), and the company is structured so that control and economic benefit can be separated: the parents keep control through the shares they hold and a tailored set of articles, while value is passed to the children through shares given to them. A shareholders’ agreement and bespoke articles do the real work.

FIC or trust? The honest comparison

Where an FIC can win

—No 20% entry charge on funding it, unlike a large gift into a discretionary trust.

—No ten-year or exit charges; companies are outside the trust “relevant property” regime.

—Profits taxed at corporation-tax rates, which can aid reinvestment and growth.

—Familiar company law; parents keep clear, lasting control.

Where a trust can win

—Greater flexibility to decide later who benefits, when, and by how much.

—Stronger protection against a beneficiary’s divorce, bankruptcy or creditors.

—Simpler and cheaper to run; no company accounts or public filings.

—Private — a trust does not appear on a public register the way a company does.

They are not mutually exclusive: it is common to use a trust to hold the shares in an FIC, combining the company’s tax efficiency with the trust’s flexibility and protection.

Why people use them — and the part that is oversold

Used well, an FIC lets parents move the future growth of an investment portfolio to their children while keeping control and an income stream for themselves, with the gift of shares being a potentially exempt transfer that falls out of the estate after seven years. That is a genuine, long-term inheritance-tax planning benefit for a substantial portfolio.

Read this before you are sold one

An FIC is not a quick or guaranteed tax saver. There is double taxation to manage — the company pays corporation tax on its gains and income, and shareholders pay tax again when money is taken out. It carries real running costs: annual accounts, corporation-tax returns, company filings and director duties. It only makes sense above a certain scale — typically substantial investable wealth — and HMRC keeps these structures under review. Anyone presenting an FIC as a simple way to dodge tax is overstating it; it is a long-term structure for a particular kind of estate, not a loophole.

The obligations that come with it

—Company administration. Annual accounts, a confirmation statement and corporation-tax returns, every year, on time.
—Director duties. Those running the company owe legal duties to it and must keep proper records and minutes of decisions.
—A degree of publicity. A company’s existence, directors and people with significant control appear on the public register at Companies House.
—A shareholders’ agreement. The family needs clear, agreed rules on decisions, leaving, and selling shares — the document that prevents disputes later.

If you take nothing else from this note

An FIC lets parents pass future growth to children while keeping control and income.
It avoids the trust entry, ten-year and exit charges, but brings double taxation and running costs.
It suits substantial estates taking a long view — not those wanting a quick fix.
Often used alongside a trust, not instead of one.

This note is general information and does not constitute advice on your circumstances. An FIC has legal, tax and accounting dimensions; we will coordinate with your accountant and advise in writing before anything is set up.

Barraj Legal — a trading style of Rhys Johns, a barrister authorised & regulated by the Bar Standards Board. Sophia House, 28 Cathedral Road, Cardiff CF11 9LJ