Family Investment Companies (FICs) have become a popular and tax-efficient tool for wealth preservation, intergenerational planning, and inheritance tax mitigation in the UK. However, with rising use comes increased scrutiny from HM Revenue & Customs (HMRC) — especially for high net worth individuals (HNWIs) using FICs as part of their estate or tax planning.
In this article, we explore how FICs work, why HMRC is paying attention, and how to ensure your structure remains compliant, effective, and future-proof.
What is a Family Investment Company?
A Family Investment Company (FIC) is a UK-based private limited company used to hold investments (such as shares, property, or cash) for the long-term benefit of a family. Typically, it allows parents (or older generations) to retain control via voting shares, while younger family members hold non-voting shares enabling the transfer of wealth without full control.
Why use a FIC?
FICs offer several benefits compared to traditional trusts or direct gifting:
- Corporation tax efficiency: profits are taxed at 25% (for most), often less than personal tax rates.
- Asset protection: family wealth is held in a company structure with defined legal safeguards.
- Control retention: older generations can control company decisions without direct ownership of all value.
- Succession planning: shareholdings can be passed down in a tax-efficient, phased manner.
Why is HMRC interested in FICs?
In 2019, HMRC set up a specialist team to review FICs, examining whether they were being used for tax avoidance. While no systemic abuse was found and the team was disbanded in 2021, HMRC continues to monitor FICs under standard compliance procedures.
This means FICs are legal, but they must be used correctly. Poor structuring or aggressive tax planning can draw unwanted attention.
Key legal and tax considerations for FIC owners
If you're using or setting up a FIC in 2025, consider the following compliance essentials:
1. Inheritance tax (IHT) exposure
FICs that are investment companies rather than trading companies will not benefit from Business Property Relief (BPR). This means they are fully exposed to IHT at 40%, unless planned for effectively.
2. Double taxation risk
FIC profits are taxed via corporation tax, and then again when distributed as dividends to shareholders, which may be taxed as income.
3. Valuation and gifting
Transferring shares to family members may trigger Capital Gains Tax (CGT) and requires proper valuation - especially for minority holdings.
4. Governance and reporting
FICs must comply with Companies House filing obligations, maintain accounting standards, and follow corporate governance rules. Failure to deal with administration properly can undermine the legal protections.
Best practices for a compliant and effective FIC
To help ensure your FIC continues to meet its objectives and avoids HMRC scrutiny:
- Work with legal and tax advisors: don't “do-it-yourself”, rather use experts to tailor your structure.
- Document everything: board minutes, loans, share allocations, dividend decisions - clarity is key.
- Regularly review the structure: as family dynamics and tax rules change, so should your FIC.
- Avoid artificial tax schemes: HMRC is particularly sensitive to schemes that appear to shift value without real substance.
- Educate shareholders: especially when involving the next generation, explain roles, risks, and responsibilities.
Final thoughts
In 2025, FICs remain a powerful estate planning tool but only when used transparently and with care. HNWIs should see FICs as part of a broader wealth strategy, not a one-size-fits-all solution.
With ongoing HMRC oversight and potential changes to tax law on the horizon, now is the time to review existing FICs and structure new ones with expert input.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
