Family Investment Companies: The Corporate Vehicle of Choice

Family Investment Companies (FICs) are corporate vehicles used in family wealth structuring, allowing families to pool assets and make strategic decisions about how those assets are invested. Historically, Trusts have been the vehicle of choice for transferring wealth through generations; however, recent changes to the UK tax regime have sparked a growing interest in FICs as an alternative.

A major factor behind the rise of Jersey FICs is a tightening of the UK tax treatment of Trusts, first announced in the 2024 UK Budget, which reduced their appeal as long‑term wealth‑planning vehicles. UK trust taxation has become more complex and less attractive, pushing families to seek alternatives that afford a clear and robust succession plan. Private Wealth practitioners have also seen a marked shift towards HNW families taking a more active approach to the control over family wealth and FIC’s allow family members to tailor voting rights, dividend rights, and veto powers, enabling sophisticated control models across generations.

Structure

A FIC is usually incorporated in an offshore jurisdiction, such as Jersey, but is managed and controlled from the UK. The ownership structure of the FIC can be designed to allow varying rights for different family members by establishing different share classes. It is typical for parents to have voting rights and access to the income generated within the FIC whereas children often hold non-voting shares which entitle them to benefit from the future growth of the company.

Good corporate governance is key to ensuring the longevity and success of the FIC and often a formal governance structure is put in place to define decision making. The board of directors ultimately controls the FIC, however, family councils and/or investment committees can be established to complement the governance structure. It is not uncommon for Middle Eastern families to have a family charter, with key elements such as conflict resolution, being incorporated into the FIC’s constitutional documents.

 
Benefits

1. Inheritance Tax (IHT) Planning
FICs are effective for inheritance tax planning. By transferring assets into a FIC, parents can pass on wealth to their children through shares. After seven years, the value of these shares falls outside the parents' estate for IHT purposes.

In addition, the shares held by a non-UK domiciled shareholder in an offshore company would not be considered a UK asset and therefore not subject to UK inheritance tax. The UK also has bilateral treaties with a number of other countries that block double taxation on gifts, estates and inheritance. 

2. Tax on Dividends
Any dividends paid to the FIC’s shareholders will be subject to income tax in their hands, however, non-UK resident individuals will have no UK income tax liability.

3. Corporation Tax Efficiency
The current rates of corporation tax at which any income and capital gains are taxed within the FIC are significantly lower than the top rates of income tax and capital gains tax payable when assets are held in a Trust or directly by family members.

4. Control and Flexibility
Parents or senior family members can retain control while transferring wealth to the next generation. Different share classes can be issued to provide varying levels of control, dividend rights, and voting power. Growth shares can direct the future value of the FIC to the holder of the growth shares and effectively “freeze” the value of the shares held by the other shareholders. This can be a useful way of passing wealth to other family members.

5. Asset Protection
Placing assets within a FIC can protect family wealth from external risks such as divorce, creditors, or poor financial management by beneficiaries.

6. Capital Gains Tax (CGT)
Any gains arising within the FIC are charged to corporation tax. Non-UK resident shareholders will not be subject to any UK capital gains tax unless the FIC holds UK property.

Summary

Overall, FICs provide a structured and tax-efficient way to manage and transfer family wealth while maintaining control and flexibility. FIC’s are bespoke to each family’s circumstances and there is no “one size fits all” approach. The complex nature of FIC’s in the context of UK tax planning means that professional tax advice is required to ensure complete tax and regulatory compliance. Fairway has an excellent intermediary network of UK tax advisors, lawyers and accountants who work together to provide a comprehensive offering to clients interested in creating a FIC.  

Fairway’s services include:

• Project managing the pre-incorporation advice
• Client onboarding
• FIC incorporation in Jersey
• Provision of company secretarial services
• Company administration services
• Bookkeeping and preparation of annual financial statements