The use of Family Investment Companies (FIC) has come under investigation by a small ‘secret’ HMRC team known as the FICs Unit. The unit was launched in April 2019, with the purpose of investigating the use of family investment companies by the very wealthy to avoid paying inheritance tax.
A FIC can be used as an alternative to a family trust. It is a private company whose shareholders are family members. This enables high-net worth individuals (HNWs) to retain greater control over their assets and investment strategy, and unlike trusts, funds paid into a FIC are not generally subject to upfront inheritance tax. In addition to which, tax on dividends is paid at the standard rate of corporation tax (19%) instead of personal income tax.
HMRC defended its position not to reveal details about the new team because doing so “would allow opportunistic individuals and would be avoiders to identify where HMRC is devoting resources and arrange their activities to escape challenge.”
It is very clear that HMRC has set up the unit with the clear intention of maximising revenues from the UK’s richest families.
Specialists within our Private Client Tax team work closely with clients to formulate a long-term inheritance tax planning strategy and protect family wealth. If you would like to discuss, call us on 01788 539000.