Reduce Inheritance Tax With A Family Investment Company

Published / Last Updated on 26/02/2020

Family Investment Companies (FIC) to save inheritance tax by setting up a limited company then restructure the shares (with legal advice) to offer Type A shares (no ownership of equity but management control) and Type B shares (full equity ownership but none or limited management control or voting rights).

Gift the Type B shares to loved ones, no value and outside estate for inheritance tax purposes after 7 years.

You keep Type A shares.  You then make an interest free loan to the company.

The company can then invest, buy property or other assets. 

The company then makes money on income or growth but only pays corporation tax (currently 19%) rather than income taxes at 20%, 40% or 45%.  19% corporation tax rather than 28% capital gains tax and likely to be nil inheritance tax after 7 years - not 40%.

Interest free loan is either paid back to you over time or on death but any growth on assets, properties owned etc is outside the estate for inheritance tax.

Beware - ATED - Annual Tax on Enveloped Dwellings - if a residential property is worth over £500,000 or more

Beware - HMRC has set up a special team to investigate the wealthy and the use of FICs.

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