A family investment company (FIC) is a vehicle which has increasingly been used as a way not only of holding family assets, but also passing wealth to the next generation. If correctly structured, it has the benefit of allowing adult children to become involved with the management of assets without transferring complete control to them and, depending on how the company is run, it can have short term tax advantages when compared to direct personal ownership, as well as long term potential inheritance tax advantages.
HMRC was concerned about the potential loss of inheritance tax and quietly set up a unit to investigate any tax loss. HMRC told the Financial Times in 2020 that the unit “…was established…in April 2019 to look at FICs and do a quantitative and qualitative review into any tax risks associated with them with a focus on inheritance tax implications. The team’s work is exploratory at this stage and as such, we would not like to share any more details”.
HMRC has now confirmed that the team has been wound up, after finding no evidence of correlation between the use of FICs and non-compliant behaviour. Whilst they say they now have a better understanding of why families are using FICs, they would not confirm that they have no intention to introduce anti-avoidance legislation in the future. For the time being, therefore, FICs remain an attractive option, but watch out for future changes!