Family investment companies (FIC) have been increasingly used to hold family assets and to pass wealth to the next generations. Well-structured FIC’s allow adult children to become involved with the management of assets without taking the complete control of the FIC’s. This can have both short-term tax advantages as well as long term potential inheritance tax advantages.
In 2019 HMRC set up a unit to investigate potential loss of inheritance tax. This unit looked at FICs and carried out a quantitative and qualitative review into any tax risks associated with such entities, with a focus on inheritance tax implications.
The investigative unit has been closed down after failing to find any correlation between the use of FIC’s and non-compliant behaviour. They, however, have not confirmed that they have no intention of introducing anti-avoidance legislations in the future. FIC’s, therefore, remain an active option however the prospects of future changes cannot be ruled out.