Family Investment Company (FIC): Strategy and Structure Explained

A Family Investment Company (FIC) is a private limited company used by families to manage and grow long-term wealth. It’s designed to help preserve capital, pass it on to future generations, and protect assets — while offering control, tax efficiency, and flexibility.

FICs have become a popular tool for wealthy families, entrepreneurs and business owners in the UK, especially as alternatives to traditional trusts face tighter regulation and less generous tax relief.

What Is a Family Investment Company?

A Family Investment Company is a company typically set up and controlled by parents or senior family members, who invest capital into the business and retain control over strategic decisions. Shares are then allocated to children or trusts, giving them an interest in the value and growth — without giving them immediate control.

The company holds investment assets, such as:

• Cash

• Shares and funds

• Property portfolios

• Bonds and other financial instruments

The aim is to manage these assets centrally and build intergenerational wealth within a corporate structure.

How Does a FIC Work?

The key to a FIC is its share structure. Usually, there are different classes of shares:

• Voting shares: Held by the founders or parents, giving control over decisions.

• Non-voting growth shares: Held by children or trusts, giving entitlement to future value without control.

The founders often loan capital to the company (rather than gifting it), which can be repaid over time, helping retain control and reduce inheritance tax exposure.

The company then invests the capital and pays Corporation Tax on its profits. Over time, returns can be distributed (or retained), depending on family strategy.

Family Investment Companies

FICs are typically used as part of wider estate planning, wealth management or business succession strategies. They are not off-the-shelf companies — every FIC should be tailored based on the family’s goals, size of wealth, age of the next generation, and appetite for control.

They are often used by:

• Business owners with excess retained profits

• High-net-worth families looking to plan for IHT

• Parents who want to pass on assets gradually

• Families managing large investment portfolios

FICs are sometimes used alongside family trusts, but with more flexibility and different tax implications.

When Should I Use an FIC Strategy?

A Family Investment Company might be the right strategy when:

• You want to pass on wealth gradually without giving up control

• You’re looking for an IHT-efficient way to manage family assets

• You’ve already used up trust allowances or want more flexibility

• You have surplus capital from a business sale or liquidation

• You’re planning a long-term structure for property or investment income

It’s best suited to families with £1m+ in capital, though they can be structured at lower levels too with the right planning.

How Are FICs Taxed?

FICs are taxed like any UK company:

• Corporation Tax on profits (currently 25% for most companies)

• No Income Tax on retained profits

• Tax planning opportunities around director’s salaries, dividends and loans

There’s no Inheritance Tax (IHT) on shares gifted early (if you survive 7 years), and the use of different share classes can help control who benefits from income and growth.

However, there is no automatic CGT or IHT relief, so planning is key. Distributions are also taxed depending on how they are made (dividends, loan repayments, etc.).

What Are the Advantages and Disadvantages of a FIC?

Advantages:

• Retain control while passing on value

• Flexible structure tailored to your family

• Potential IHT benefits

• Profits taxed at Corporation Tax rates, not Income Tax

• Can hold a wide range of investments

• Can be used with trusts and other planning tools

• Long-term succession planning without handing over cash

Disadvantages:

• Setup and admin costs can be significant

• Tax benefits depend on structure — poor planning can backfire

• Regular compliance: annual accounts, Corporation Tax returns, director duties

• Potential scrutiny from HMRC if not properly justified

• Less privacy than a trust — company accounts are public

FICs aren’t a tax dodge — they’re a legitimate planning tool, but they need careful handling.

Things to Think About When Considering an FIC

Before setting up a FIC, you should:

• Review your estate planning goals and timescales

• Get advice on Capital Gains Tax, Inheritance Tax, and Corporation Tax implications

• Understand the difference between gifting and loaning capital to the company

• Think about who will act as directors, shareholders, and whether to include trusts

• Plan for succession: how and when will shares pass to the next generation?

FICs require long-term thinking and detailed legal and tax planning. They work best as part of a broader financial strategy.

Final Thoughts

Family Investment Companies offer a flexible, modern way to manage wealth across generations. With the right structure, they can combine control, tax efficiency, and asset protection, especially for high-net-worth families or entrepreneurs planning succession.