Kirk Rice Blog

Family Investment Companies (FICs) Explained: Tax, Structure, and SuitabilityWritten on January 6, 2026 by Kirk Rice LLP

Key points

• Family Investment Companies may be suitable for families with substantial assets who want to pass on wealth while retaining control, but objectives need to be clearly defined first.
• Compared with trusts, Family Investment Companies involve different inheritance tax, income tax, and capital gains considerations, particularly around control and profit extraction.
• The type of assets transferred into a Family Investment Company matters, as property and investment portfolios can create upfront tax costs.
• It’s recommended financing decisions should be made carefully at the outset, with appropriate legal and tax advice.
• In practice, Family Investment Companies are often considered where assets are around £2 million or more, depending on complexity and objectives. But this is not a fixed threshold, and suitability will always depend on each circumstance.
• Listen to or download our podcast on FICs here: Family Investment Company Podcast 

Family Investment Companies (FICs) have become an increasingly popular vehicle for high-net-worth families seeking to manage, grow, and pass on wealth in a tax-efficient manner while retaining control. Our blog provides an overview of the structure, tax implications, and suitability of FICs, with a comparison to trusts and a summary of the practical considerations.

Structure of a Family Investment Company

An FIC is typically a UK private limited company established to hold and manage family wealth, such as cash, property, or investment portfolios. The structure is highly flexible and can be tailored to meet the family’s objectives:

• Share Classes and Control: Founders (often parents) usually retain control through voting shares, while family members (such as children) may hold non-voting or growth shares. This allows the founder to direct investment and dividend policy while enabling family members to benefit from future growth.
• Funding: FICs are commonly funded by cash or assets introduced by the founder, often via a director’s loan (which can be repaid tax-free) or by share subscription. The introduction of assets other than cash (e.g., property or shares) can trigger capital gains tax (CGT) and, for property, stamp duty land tax (SDLT), as transfers between connected parties are deemed to occur at market value.
• Documentation: Proper legal and tax documentation is essential at the outset to ensure the structure functions as intended and to mitigate anti-avoidance risks.

Taxation of Family Investment Companies

Corporation Tax

• FICs are subject to corporation tax on worldwide income and gains. The main rate is 25%, and most FICs are classified as close investment holding companies, meaning they do not benefit from the small profits rate or marginal relief.
• Most dividends received by a UK company are exempt from corporation tax, allowing dividend income to accumulate tax-free within the FIC until extracted.
• Capital gains realised by the FIC are subject to corporation tax at 25%. Indexation allowance is available for gains accrued up to December 2017.
• Interest on loans used for business purposes and management expenses are generally deductible, subject to certain restrictions.

Income Tax and profit extraction

• Profits distributed as dividends to shareholders are taxed at dividend rates (8.75%, 33.75%, or 39.35% depending on the recipient’s income band). Dividends paid to minor children are taxed on the parent.
• Repayment of a director’s loan is not taxable for the recipient, provided it is a genuine loan.
• Salaries paid to shareholder-employees are subject to PAYE and National Insurance but are deductible for the FIC if at a commercial rate.

Capital Gains Tax on extraction

• On sale or liquidation of the FIC, shareholders are subject to CGT on the increase in value of their shares (typically at 24%). If distributions are treated as income under anti-avoidance rules, higher income tax rates may apply.

Inheritance Tax (IHT)

• Gifts of shares to family members are potentially exempt transfers (PETs) for IHT, meaning the value falls out of the donor’s estate if they survive seven years. This contrasts with most trusts, where transfers above the nil-rate band (£325,000) trigger an immediate 20% IHT charge.
• Issuing growth shares to children or trusts allows future value to accrue outside the founder’s estate, reducing IHT exposure over time.
• If the founder retains control or benefits, the gift with reservation of benefit (GWR) rules may apply, potentially bringing the value back into their estate for IHT. Careful structuring is required to avoid this.

Suitability and practical considerations

FICs are most suitable for high-net-worth individuals or families with substantial assets (often £2 million or more, though this is not a fixed threshold) who wish to pass on wealth tax-efficiently while retaining control.

They can hold a wide range of assets, including cash, property, and investment portfolios. However, holding personal-use assets can trigger benefit-in-kind charges and other tax complications.

Funding for FICs is typically via loans (allowing tax-free repayment) or share subscriptions. The structure and documentation must be carefully prepared to avoid anti-avoidance issues and ensure tax efficiency. However, they incur annual costs for statutory accounts, Companies House filings, corporation tax returns, and investment management. These costs are generally modest relative to the scale of assets involved.

The settlements legislation may also apply if there is an element of bounty and the founder retains an interest. HMRC has not generally challenged FICs on this basis. However, the risk remains, especially with complex share structures or income shifting.

Find out more on our Family Investment Company page. 

Comparison with Trusts

• IHT: Trusts face an immediate IHT charge on lifetime transfers above the nil-rate band, while FICs do not. FICs allow for PETs and the possibility of passing on future growth tax-efficiently.
• Control: FICs allow founders to retain control via voting shares, whereas trusts often require relinquishing control to trustees.
• Taxation: FICs are taxed at corporation tax rates on income and gains, which can be lower than personal or trust rates, but extraction of profits is subject to further tax. Trusts are subject to higher rates of income tax and CGT and have more complex reporting requirements.

The benefits of early professional advice for FICs

Family Investment Companies offer a flexible and potentially tax-efficient vehicle for managing and passing on family wealth, particularly for those with substantial assets and a desire to retain control. They offer advantages over trusts in terms of IHT planning and control but require careful structuring to avoid pitfalls related to CGT, SDLT, anti-avoidance rules, and ongoing tax compliance.

However, the tax treatment of FICs is subject to change, particularly as HMRC continues to review their use in IHT planning. Suitability depends on individual circumstances, objectives, and the nature and value of assets involved. For these reasons, professional advice is advised early-on. Kirk Rice’s specialists can help to ensure your FIC is structured and operated effectively.

If you’d like to talk to us about whether a Family Investment Company is suitable for you, get in touch via info@kirkrice.co.uk

Please note: This article is correct as at the publication date. The answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of relief from taxation are subject to change. The Financial Conduct Authority does not regulate tax planning.