Family Investment Companies: Are They Still Worth It in 2026?

family-investment-company-fic-tax-inheritance-tax

How FICs Can Help Families Hold Property and Investments, Pass Wealth to Future Generations and Plan for Inheritance Tax

By Steve Bicknell FCMA, CGMA

A Family Investment Company can be a powerful way of holding family wealth, investing for the long term and passing future growth to children and grandchildren while the older generation retains control.

But a FIC is not a magic tax-saving company.

There is no special statutory definition of a Family Investment Company (FIC). It is normally a private limited company specifically structured to hold family investments, with different family members or trusts owning different classes of shares.

Those shares can have different rights to:

voting and control;
dividends;
capital;
and future growth.

HMRC itself investigated Family Investment Companies through a specialist unit established in 2019. Its conclusion was significant: HMRC found no evidence that people establishing FICs were more inclined towards avoidance or non-compliance. HMRC subsequently closed the dedicated unit and moved FICs into “business as usual” compliance activity.

So what exactly is a Family Investment Company, how does it work, and is a FIC still worth considering in 2026?

Family Investment Company – Quick Answer

A FIC can be particularly useful where a family has substantial wealth to invest and wants to:

RETAIN CONTROL

while allowing:

CHILDREN OR GRANDCHILDREN TO BENEFIT FROM FUTURE GROWTH

and potentially:

REDUCE FUTURE INHERITANCE TAX EXPOSURE.

A typical FIC might have:

Control or founder shares
held by parents or grandparents

and:

Growth shares
held by adult children, other family members or possibly trusts.

The company might invest in:

property;
shares and investment portfolios;
cash and fixed-interest investments;
loans;
or a combination of assets.

But there is an important point:

A FIC IS GENERALLY MORE ATTRACTIVE FOR LONG-TERM WEALTH ACCUMULATION THAN FOR REGULARLY EXTRACTING ALL THE PROFITS.

Once profits are extracted from the company, a second layer of personal taxation may arise.

What Is a Family Investment Company?

A FIC is normally a UK private company whose shareholders are members of the same family, sometimes across several generations.

Interestingly, HMRC does not have a statutory definition of a FIC.

During its own research, however, HMRC identified several common characteristics:

shareholders are usually members of the same family;
there are often at least two generations involved;
shares can be held directly or through trusts;
there are commonly several classes of shares;
different generations may have different rights;
older generations often retain voting control;
younger generations may have rights to income or capital;
and the company generally holds investments such as shares or property rather than carrying on a trade.

That is a useful description of how many FICs work in practice.

What Does HMRC Think About Family Investment Companies?

This is particularly interesting because HMRC actually set up a dedicated unit to investigate them.

HMRC’s Family Investment Company Unit

HMRC established a specialist Family Investment Company team in April 2019.

Its purpose was to improve HMRC’s understanding of FICs, establish their common characteristics, examine the wealth profile of the families using them and identify potential tax risks.

HMRC carried out detailed reviews of FICs together with their:

shareholders;
associated trusts;
investment structures;
and other information available to HMRC.

Some FICs were also contacted directly as part of the research.

HMRC published its findings in the minutes of its Wealthy External Stakeholders Forum on 13 May 2021.

And its conclusion was particularly important.

HMRC said:

“there was no evidence to suggest that there was a correlation between those who establish a FIC structure and non-compliant behaviours.”

It also reported no evidence suggesting that people using FICs were more inclined towards avoidance.

That does not mean HMRC has formally “approved” FICs.

It does mean HMRC’s dedicated investigation did not conclude that using a Family Investment Company was, in itself, indicative of tax avoidance or non-compliance.

What Did HMRC Find FICs Were Being Used For?

HMRC found that FICs appeared primarily to be used as a:

GENERATIONAL WEALTH TRANSFER STRATEGY

often with the objective of mitigating future Inheritance Tax.

HMRC also recognised that there was considerable diversity in the way FICs were structured.

And that creates potential tax issues across several taxes, including:

INHERITANCE TAX

CAPITAL GAINS TAX

STAMP DUTY LAND TAX

CORPORATION TAX.

So HMRC’s conclusion wasn’t:

“There are no tax risks with FICs.”

It was much more nuanced.

The structure itself isn’t inherently avoidance, but the individual transactions within the structure still have to comply with the tax rules.

What Happened to HMRC’s Specialist FIC Unit?

Having completed its research, HMRC closed the dedicated FIC team.

Its work was absorbed into HMRC’s wider Wealthy and Mid-sized Business Compliance activity.

HMRC’s conclusion was that FICs would thereafter be considered:

“AS BUSINESS AS USUAL”

rather than requiring a dedicated specialist unit.

I think that’s probably the best way of understanding HMRC’s position.

A FIC isn’t automatically an avoidance scheme.

But neither does calling something a “Family Investment Company” give it special tax protection.

HMRC LOOKS AT WHAT THE FIC ACTUALLY DOES — NOT SIMPLY WHAT IT IS CALLED.

How Does a Family Investment Company Work?

Let’s use a completely fictional example.

David and Emma Taylor have accumulated substantial savings and investments.

They have two adult children:

Alex and Sophie.

They want to invest for the long term, retain control of the family wealth and allow the next generation to participate in future growth.

They establish:

TAYLOR FAMILY INVESTMENTS LTD

The company might invest in:

residential property;
commercial property;
quoted shares;
investment funds;
cash;
or other investments.

Instead of everyone owning identical ordinary shares, the Articles of Association can create different classes of shares with different rights.

This enables the family to separate:

CONTROL

from:

ECONOMIC OWNERSHIP AND FUTURE GROWTH.

Control Shares and Growth Shares

Suppose Taylor Family Investments Ltd is initially worth:

£100,000.

Its share structure might be designed so that:

A Shares – David and Emma

carry voting rights and control.

Their capital entitlement might broadly reflect or “freeze” the existing value.

B Shares – Alex

participate in future growth.

C Shares – Sophie

also participate in future growth.

Now suppose the company eventually becomes worth:

£1,000,000.

The intention might be for much of the:

£900,000 FUTURE GROWTH

to accrue to the B and C growth shares rather than David and Emma’s shares.

This is the principle behind:

FREEZER SHARES

and:

GROWTH SHARES.

How Can Growth Shares Help With Inheritance Tax?

Suppose instead David and Emma simply own 100% of an investment company throughout their lives.

If the company eventually becomes worth £1 million, they potentially have:

within their estates.

With a carefully structured FIC, the intention may be to fix or restrict the value attributable to the older generation while allowing subsequent growth to accrue to shares owned by the next generation.

The strategy is therefore often not:

GIVE AWAY EVERYTHING TODAY.

It is:

MOVE FUTURE GROWTH AWAY FROM THE OLDER GENERATION.

This can be attractive where parents or grandparents want to retain voting control but do not need all the future economic growth personally.

Valuation Is Critical

Growth shares aren’t simply a matter of creating a new class of shares and giving them a nominal value of £1.

The rights attached to shares have value.

That can include:

voting rights;
dividend rights;
capital rights;
rights on a sale;
rights on liquidation;
restrictions;
and the relationship between the different share classes.

If an existing company is already valuable and its share rights are changed, value may effectively move between shareholders.

That can have consequences for:

CAPITAL GAINS TAX

and:

INHERITANCE TAX.

There can also be Employment Related Securities implications in appropriate circumstances.

This is why it is generally much easier to design the share structure before substantial value has accrued.

Funding a FIC – Loan or Shares?

This is one of the most important decisions when establishing a Family Investment Company.

Suppose David has:

£1,000,000

to invest.

There are two fundamentally different ways he could provide it to the FIC.

Option 1 – Loan £1 Million to the FIC

David lends:

£1,000,000

to Taylor Family Investments Ltd.

Initially the company’s balance sheet might broadly look like:

	£
Cash	1,000,000
Loan due to David	(1,000,000)
Net value before other items	Nil

The company can then invest the £1 million.

An important feature of this approach is that the company owes David the money.

That means it can potentially repay his loan later without the repayment itself being a dividend.

This can provide considerable flexibility.

But there is an important IHT point:

THE £1 MILLION LOAN STILL BELONGS TO DAVID.

Simply replacing £1 million in a bank account with a £1 million loan receivable does not remove £1 million from his estate.

Suppose instead David subscribes:

£1,000,000

for shares.

The company now has £1 million of assets without a corresponding £1 million loan liability.

The shares therefore potentially have substantial value.

If David subsequently gives shares to his children or a trust, their value needs to be considered.

So:

LOAN FUNDING

and:

EQUITY FUNDING

can produce very different:

share values;
CGT consequences;
IHT consequences;
and access to the original capital.

Can the FIC Loan Be Gifted Later?

Potentially.

Suppose David initially lends £1 million to the company because he isn’t certain how much capital he will need in retirement.

Five years later he concludes that he only needs £400,000 returned.

He could consider gifting part of the remaining loan to adult children.

An outright gift to an individual can potentially be a:

POTENTIALLY EXEMPT TRANSFER

for Inheritance Tax.

If the donor survives seven years, the value of the gift can generally fall outside their estate, subject to the normal IHT rules.

This illustrates one of the attractions of loan funding:

YOU DON’T NECESSARILY HAVE TO MAKE EVERY SUCCESSION DECISION ON DAY ONE.

Can Children Own Shares in a FIC?

Yes, but there is an important distinction between:

ADULT CHILDREN

and:

MINOR CHILDREN.

Giving income-producing shares to minor children does not automatically move the tax liability on the income to them.

The settlements legislation can attribute income back to a parent where income is diverted to their minor child.

So a strategy based simply on:

“We’ll give shares to the children and use their tax allowances.”

needs very careful consideration.

Adult children are generally much more straightforward, although the ownership and rights must still be genuine.

What About Adult Children at University?

This can be interesting.

Suppose an adult child:

is at university;
has little other income;
genuinely owns shares;
and those shares carry dividend rights.

Dividends may potentially be taxed at relatively low personal rates depending on their overall income.

For 2026/27 the dividend rates are:

Band	Dividend rate
Basic	10.75%
Higher	35.75%
Additional	39.35%

The dividend allowance remains £500.

But selective dividends and different share classes need to be supported by genuine legal rights rather than simply changing distributions each year to whichever family member happens to have the lowest tax rate.

Do You Need a Trust as Well as a FIC?

Not necessarily.

Many FICs can operate with family members owning the shares directly.

A trust can, however, add flexibility where the family wants to provide for:

grandchildren;
unborn future generations;
younger beneficiaries;
vulnerable family members;
or circumstances that cannot yet be predicted.

For example, a discretionary trust might own one class of growth shares for the benefit of a wider family group.

But trusts bring another layer of complexity, potentially including:

Trust Registration Service requirements;
tax returns;
higher trust tax rates;
ten-year IHT charges;
exit charges;
trustee responsibilities;
and specialist legal work.

So:

A FIC DOES NOT AUTOMATICALLY NEED A TRUST.

FIC Only or FIC Plus Trust?

	FIC only	FIC + discretionary trust
Retain family control	Yes	Yes
Adult children	Straightforward	Can be beneficiaries
Future generations	Less flexible	Potentially more flexible
Complexity	Moderate	Higher
Trust administration	None	Yes
10-year IHT regime	No	Potentially yes
Specialist legal drafting	Important	Essential

The decision should follow the family’s objectives rather than starting with the assumption that the most complicated structure must produce the best result.

How Is a Family Investment Company Taxed?

A FIC is subject to Corporation Tax.

But there is an important trap.

A FIC DOES NOT AUTOMATICALLY PAY 19% CORPORATION TAX.

A close investment-holding company is subject to the main Corporation Tax rate and cannot benefit from the small-profits rate or marginal relief.

HMRC specifically says that a close company simply holding investments such as a bank deposit can fall within the CIHC rules and be liable at the full Corporation Tax rate.

The main Corporation Tax rate is currently:

25%.

This is an important correction to older FIC illustrations that simply assumed 19% Corporation Tax.

The Close Investment-Holding Company Trap

Broadly, a close company is treated as a close investment-holding company unless it exists wholly or mainly for certain qualifying purposes, including:

carrying on a commercial trade;
commercial investment in land let to unconnected persons;
or certain qualifying holding/service company activities.

A FIC principally holding:

cash;
quoted securities;
investment funds;
or similar passive investments

may therefore be within the CIHC regime.

That needs to be included when comparing personal investment with investment through a FIC.

Property Family Investment Companies Can Be Different

There is an important exception for property investors.

A close company can fall outside the CIHC definition where it exists wholly or mainly to invest commercially in land which is, or is intended to be, let to unconnected persons.

That means a genuine commercial property investment FIC may potentially benefit from the normal Corporation Tax small-profits and marginal-relief rules, depending on its profits and associated companies.

But be careful with connected-party lettings.

If the property is let to connected family members or certain connected entities, the exclusion may not apply.

Already Own Other Companies? Watch Associated Companies

Many people considering a FIC already own:

trading companies;
property companies;
management companies;
or other investment companies.

The Corporation Tax thresholds can be divided according to the number of associated companies.

So adding a FIC can potentially affect the Corporation Tax position of companies you already own.

This needs modelling as part of the structure rather than looking at the FIC in isolation.

Dividends Received by a FIC

One potential attraction of a corporate investment structure is that many dividends received by UK companies fall within the corporate dividend exemption rules.

This can make a FIC attractive where investment income is going to be:

RETAINED

and:

REINVESTED

for many years.

That brings us to perhaps the most important tax issue with FICs.

The Double-Tax Problem – Getting Money Out

Suppose a FIC makes:

£100,000

of taxable investment profit.

The company may first pay Corporation Tax.

If the remaining profit is then distributed to an individual shareholder, there may also be:

DIVIDEND TAX.

So it is misleading to compare:

25% Corporation Tax

with:

40% or 45% personal Income Tax

and conclude that the company must be better.

The proper comparison may involve:

CORPORATION TAX + TAX ON EXTRACTION.

This is why FICs can work particularly well where investment returns can be:

COMPOUNDED WITHIN THE COMPANY FOR THE LONG TERM.

If the shareholders intend to withdraw virtually all the profits every year, the result can look very different.

Dividend Tax Increased From April 2026

Extraction became slightly more expensive from 6 April 2026.

The ordinary dividend rate increased to:

10.75%

and the higher dividend rate to:

35.75%.

The additional rate remains:

39.35%.

This makes modelling the eventual extraction strategy even more important.

Property Income Tax Is Changing From April 2027

There is another reason property investors may increasingly compare personal ownership with companies.

From 6 April 2027, the government is introducing separate rates for property income in England, Wales and Northern Ireland:

Property income band	Rate from April 2027
Basic	22%
Higher	42%
Additional	47%

Residential finance-cost relief will also use the new 22% property basic rate.

That doesn’t mean:

“Everyone should put property into a FIC.”

The Corporation Tax and extraction consequences still need comparing.

But it makes the personal-versus-company calculation increasingly important.

Property FICs and Mortgage Interest

Individual landlords of residential property are subject to the Section 24 finance-cost restriction.

Companies are not subject to Section 24 in the same way.

A property FIC can therefore generally obtain a Corporation Tax deduction for qualifying finance costs, subject to the normal corporate rules.

For highly geared residential property investors, this can be an important distinction.

Should You Transfer Existing Properties Into a FIC?

This is where a potentially useful structure can become extremely expensive if implemented without first doing the calculations.

Suppose David and Emma already personally own a rental portfolio worth:

£1.5 MILLION.

They decide to establish a FIC and transfer all the properties into it.

The transfer isn’t automatically tax-free simply because they own the company.

Potential taxes include:

CAPITAL GAINS TAX

for the individual owners

and:

STAMP DUTY LAND TAX

for the company.

The SDLT position can also be affected by connected-party market-value rules and residential-property surcharges.

So there is a fundamental difference between:

USING A FIC TO BUY FUTURE INVESTMENTS

and:

TRANSFERRING AN EXISTING PORTFOLIO INTO A FIC.

Calculate the entry taxes before moving anything.

Don’t Forget ATED

If a FIC owns UK residential property worth more than:

£500,000

the Annual Tax on Enveloped Dwellings (ATED) rules need considering.

A property commercially let to an unconnected third party may qualify for relief so that no ATED charge is ultimately payable.

But a relief declaration return may still be required.

This is particularly relevant with the 1 April 2027 ATED revaluation, which may bring more company-owned residential properties within the regime.

Gifts of FIC Shares

Giving shares to a family member isn’t necessarily tax-free.

For Capital Gains Tax purposes, a gift to a connected person will normally involve market value.

That means a gain can arise even though:

NO MONEY CHANGES HANDS.

For Inheritance Tax, an outright gift to an individual is generally a Potentially Exempt Transfer.

If the donor survives seven years, the gift can generally fall outside their estate.

A transfer to a discretionary trust is different and can be an immediately chargeable lifetime transfer.

Again:

VALUATION MATTERS.

Gift With Reservation of Benefit

A common objective is to transfer economic value to the next generation while the older generation retains control.

But there is an important distinction between:

CONTROL

and:

CONTINUING TO ENJOY THE VALUE YOU SUPPOSEDLY GAVE AWAY.

If a parent gives away shares or value but continues to benefit from what was gifted, the Gift With Reservation of Benefit rules may potentially apply.

This is another reason why the rights attached to the various share classes and the actual payment of dividends need to match the intended structure.

Another specialist area is the Employment Related Securities legislation.

This may need considering where shares are acquired by:

employees;
directors;
family members who work in the business;
or people whose shareholding may be connected with their employment.

This is particularly relevant with growth shares and restricted share rights.

Family relationships can affect the analysis, but the point shouldn’t simply be ignored because everybody involved is related.

Advantages of a Family Investment Company

A properly structured FIC can potentially offer several advantages.

1. Retaining Control

Parents or grandparents can potentially retain voting control.

2. Passing Future Growth Down the Family

Growth shares can allow younger generations to participate in future increases in value.

3. Inheritance Tax Planning

Future growth may potentially accrue outside the older generation’s estates.

Voting, income and capital rights can be separated.

5. Long-Term Corporate Reinvestment

Profits can be retained and reinvested rather than necessarily being distributed every year.

6. Loan Account Flexibility

Initial funding provided by loan can potentially be repaid without the repayment itself being a dividend.

7. Property Finance Costs

A company is not subject to the residential Section 24 restriction in the same way as an individual landlord.

8. Succession

A FIC can potentially provide a structure capable of continuing across several generations.

Disadvantages of a Family Investment Company

There are equally important drawbacks.

1. Double Tax on Extraction

Corporation Tax can be followed by personal tax when profits are distributed.

2. 25% Corporation Tax Can Apply

A securities/cash FIC may be a close investment-holding company.

3. Complexity

Different share classes require careful legal drafting.

4. Valuations

Growth shares, gifts and restructuring can require specialist valuation.

5. Annual Compliance

The company requires accounts, Corporation Tax returns, Companies House filings and bookkeeping.

6. Investment Companies Generally Don’t Qualify for Business Relief

So don’t assume the shares themselves automatically receive IHT Business Relief.

7. Trusts Add Another Layer

Trust tax, IHT and administration may all arise.

8. Moving Existing Property Can Be Expensive

CGT and SDLT can make transferring an established portfolio unattractive.

9. ATED

Higher-value residential property can create additional annual compliance.

10. Family Members Become Genuine Shareholders

Once shares have been given away, the recipients have real legal and economic rights.

A FIC should therefore be viewed as long-term succession planning rather than something that can simply be undone whenever circumstances change.

Worked Example – £1 Million Family Investment Company

Let’s return to our fictional family.

David and Emma have:

£1 MILLION CASH

available for long-term investment.

They don’t need all of the capital for their normal living costs.

They want to benefit Alex, Sophie and eventually future grandchildren.

They establish:

TAYLOR FAMILY INVESTMENTS LTD.

David lends the company:

£1,000,000.

The company invests the money.

Because the £1 million asset is matched by the £1 million loan liability, the company’s shares may initially have relatively little value.

The share rights are structured at an early stage so that Alex and Sophie have genuine rights to future growth.

Twenty years later, suppose the investments are worth:

£3,000,000.

The original:

£1,000,000 LOAN

still belongs to David to the extent it hasn’t been repaid or gifted.

But much of the:

£2,000,000 FUTURE GROWTH

may potentially have accrued to the growth shares.

That illustrates one of the central principles of FIC planning:

THE FIC HASN’T MAGICALLY REMOVED £1 MILLION FROM DAVID’S ESTATE.

Instead, it may have:

REDIRECTED THE FUTURE GROWTH.

That distinction is crucial.

10 Questions to Ask Before Setting Up a FIC

1. What are we trying to achieve?

IHT planning, succession, property investment, investment compounding or a combination?

2. How much are we investing?

The setup and ongoing costs need to be proportionate to the wealth involved.

3. Loan or equity?

This can completely change the initial share values and future access to capital.

4. Who needs control?

Parents, grandparents, children or trustees?

5. Who should benefit from future growth?

Children, grandchildren or a trust?

6. Do the founders need investment income personally?

If most profits need extracting annually, the FIC may be less attractive.

7. What will the FIC invest in?

Property, shares and cash can have very different Corporation Tax consequences.

8. Will it be a close investment-holding company?

Don’t automatically assume 19% Corporation Tax.

9. Are existing properties or investments being transferred?

Calculate CGT and SDLT before doing it.

10. What happens in 10, 20 or 30 years?

Think about succession, death, divorce, family disagreements, grandchildren and eventual extraction before choosing the share rights.

Frequently Asked Questions

What is a Family Investment Company?

A FIC is normally a private company owned by members of the same family and used to hold investments such as property, shares and cash. Different share classes can separate voting control, income and capital growth. HMRC itself identified these as common FIC characteristics.

Is a FIC a tax avoidance scheme?

No. HMRC’s own specialist FIC research found no evidence that people establishing FICs were more inclined towards avoidance or non-compliant behaviour. Normal tax and anti-avoidance legislation nevertheless applies to every transaction undertaken by the company and its shareholders.

Does HMRC still have a Family Investment Company Unit?

No dedicated FIC research unit remains. HMRC completed its specialist work and moved FICs into its normal compliance activity — described in its 2021 minutes as “business as usual.”

Can parents retain control of a FIC?

Potentially. Different share classes can allow one generation to retain voting rights while other classes participate in income or future capital growth.

Can a FIC reduce Inheritance Tax?

Potentially. One strategy is to retain the older generation’s existing value while directing future growth to younger generations. The actual IHT result depends on the share rights, valuations, gifts and retained benefits.

Should I fund a FIC with a loan?

Loan funding can provide considerable flexibility because the company may later repay the loan without that repayment being a dividend. However, the loan remains an asset of the lender’s estate until it is repaid, spent or validly given away.

Can my children own FIC shares?

Yes, but arrangements involving minor children need particular care because of the settlements legislation. Adult children are generally more straightforward.

Does a FIC pay 19% Corporation Tax?

Not necessarily. A close investment-holding company is subject to the main Corporation Tax rate and cannot use the small-profits rate or marginal relief.

Is a property FIC a close investment-holding company?

Not necessarily. Commercial investment in land let to unconnected persons is specifically within an exception to the CIHC rules.

Can a FIC claim mortgage interest on residential property?

Companies aren’t subject to the Section 24 residential finance-cost restriction in the same way as individual landlords, although the normal corporate interest rules still apply.

Can I transfer my existing rental properties into a FIC?

You can, but that doesn’t mean the transfer is tax-free. CGT and SDLT can arise, so the entry cost should be calculated before proceeding.

Should a trust own FIC shares?

Sometimes. A discretionary trust can provide flexibility for future generations, but it brings additional IHT, tax, legal and compliance considerations.

Are Family Investment Companies Still Worth It in 2026?

For the right family:

YES, THEY CAN BE.

But the strongest case for a FIC isn’t simply:

“Companies pay less tax.”

Sometimes they don’t.

The real attraction is often the ability to combine:

CONTROL

with:

SUCCESSION

and:

LONG-TERM WEALTH COMPOUNDING.

A FIC can potentially allow parents or grandparents to retain control while directing future economic growth towards children and grandchildren.

Loan funding can provide access to the original capital.

Growth shares can move future value between generations.

Trusts can provide further flexibility where appropriate.

And for property investors, corporate ownership can have particular advantages around residential finance costs, especially as personal property-income tax rates are scheduled to rise to 22%, 42% and 47% from April 2027.

But these advantages need to be considered alongside:

Corporation Tax;
dividend tax;
Inheritance Tax;
CGT;
SDLT;
ATED;
associated-company rules;
share valuation;
trusts;
legal costs;
and long-term extraction.

The key is to design the structure around:

WHAT THE FAMILY WANTS THE WEALTH TO DO OVER THE NEXT 10, 20 OR 30 YEARS.

That is much more important than simply setting up a company and calling it a Family Investment Company.

How Bicknell Business Advisers Can Help

At Bicknell Business Advisers, we can help families explore whether a Family Investment Company is appropriate, including:

FIC feasibility and tax modelling;
property investment structures;
loan versus equity funding;
growth and freezer shares;
share valuation requirements;
Corporation Tax;
Inheritance Tax planning;
family shareholdings;
trusts and coordination with specialist solicitors;
CGT and SDLT on existing investments and property;
ATED;
associated companies;
and long-term extraction planning.

Where bespoke Articles of Association, trusts, wills or other legal documentation are required, appropriate specialist legal input should form part of the process.

A FIC can be a powerful structure.

But it should start with the family’s long-term objectives — not with the company formation form.

About the Author

Steve Bicknell FCMA, CGMA is Managing Director of Bicknell Business Advisers Limited, specialising in property taxation, landlord tax planning, SDLT, Capital Gains Tax and property company structures throughout the UK.

Companies House – Identity Checks – what you need to know

The Economic Crime and Corporate Transparency Act 2023 introduces significant reforms to UK company law, notably the implementation of identity verification requirements for individuals involved with UK companies. These measures aim to enhance transparency, deter fraudulent activities, and bolster trust in the corporate sector.

Transition Period and Compulsory Nature

Starting 8 April 2025, individuals can voluntarily verify their identity with Companies House. By autumn 2025, this verification becomes mandatory for new directors and Persons with Significant Control (PSCs) upon incorporation or appointment. Existing directors and PSCs will have a 12-month transition period, commencing in autumn 2025, to comply with these requirements, making verification compulsory for them by autumn 2026.

Identification Requirements

To verify identity directly with Companies House via GOV.UK One Login, individuals will need one of the following forms of photo identification:

Biometric passport from any country
UK photo driving licence (full or provisional)
UK biometric residence permit (BRP)
UK biometric residence card (BRC)
UK Frontier Worker permit (FWP)

Alternatively, verification can be conducted through an Authorised Corporate Service Provider (ACSP).

Role of Authorised Corporate Service Providers (ACSPs)

ACSPs are entities such as accountants, solicitors, and company formation agents that are supervised under anti-money laundering regulations. From 18 March 2025, these firms can apply to become ACSPs. Once registered, ACSPs can verify the identities of their clients and file information on their behalf. The verification process conducted by ACSPs must meet the same standards as those conducted directly with Companies House.

Applicability to Company Filings

The identity verification requirements apply to individuals who set up, run, own, or control a company in the UK, including directors and PSCs. While the verification is primarily associated with roles and appointments, it extends to those filing documents on behalf of a company. Therefore, individuals responsible for submitting filings, such as company secretaries, will also need to verify their identity. However, once an individual has been verified, they are not required to verify their identity each time they file a document.

Individuals Required to Verify Identity

The following individuals are required to verify their identity:

Directors (including equivalents such as LLP members)
Persons with Significant Control (PSCs)
Individuals filing documents on behalf of a company (e.g., company secretaries)

Shareholders who are not PSCs are not required to undergo identity verification under the current regulations.

These reforms represent a significant shift in UK company law, aiming to enhance the integrity of the corporate register and combat economic crime. Companies and individuals involved should prepare to comply with these new requirements within the specified timelines.

We will be applying to become an ACSP as soon as we are licenced by CIMA for this activity, the licences will be available later this year.

steve@bicknells.net

Sources:

Timeline for Companies House ID changes | ICAEW

Verifying your identity for Companies House – GOV.UK

Which is better an LLP or Limited Company?

As an accountant, I am often asked by my clients what the differences are between an LLP and a Limited company. While both provide limited liability protection, there are some distinct differences between the two.

An LLP is a type of partnership structure that offers limited liability to its partners, which means that their personal assets are not at risk if the business runs into financial difficulties or is sued. An LLP is similar to a general partnership, but unlike general partnerships, the partners are not personally liable for the company’s debts.

A Limited Company is a separate legal entity with its own legal personality, and its owners are known as shareholders. A limited company offers limited liability for its shareholders, which means their liability is restricted to the amount they’ve invested in the company.

Differences and Things to Consider

an LLP is typically set up by professionals such as lawyers, accountants, or doctors who wish to operate as a partnership. Limited company can be set up by anyone, including sole traders who wish to take their business to the next level.
Property Investors sometimes use a Partnership or LLP as stepping stone to incorporation which benefits from special SDLT treatment.
Buy to Let investors prefer Companies as they can then recover all of the mortgage interest. This isn’t possible for individuals or partnerships as interest is removed and replace with the finance allowance. This can have a big impact for higher rate tax payers.
Holiday Let owners may prefer LLP’s especially if there are large Capital Allowances to be claimed
an LLP is taxed as a partnership, with profits being distributed amongst the partners and taxed at their individual tax rates.
In contrast, a Limited company is taxed separately from its owners, and profits are subject to corporation tax rates. This can make an LLP more tax-efficient for its partners. For long term investment and building up assets a company can be more tax efficient because Corporation Tax rates are lower than income tax rates.
With a company its easier to control when income is taken by the owners which could result in tax savings, partnership profits are immediately tax on the partners
an LLP does not have shares or shareholders, but rather partners who own a percentage of the business.

Funding Differences

One significant difference between LLPs and Limited Companies is that LLPs are relatively easier to set up and require lower capital outlay and less stringent regulatory requirements. The flip side of this is that limited liability protection may not be as comprehensive as it is with Limited Companies.

If you plan to raise funds for your business, Limited Companies have an advantage as investors are more likely to invest in these structures.

Changes in Ownership

Changes in ownership are more straightforward in a Limited company due to the ability to issue and transfer shares. In an LLP, changes in ownership can be cumbersome due to the need to re-do the partnership agreement and potentially consult with partners.

Overall, the decision between setting up an LLP or a Limited company depends on the specific needs of your business.

steve@bicknells.net

Directors Loan ISA (Innovative Finance ISA)

laughing businesswoman working in office with laptop

Individual Savings Accounts (ISA’s) are tax-efficient savings and investment accounts that allow individuals to earn interest or returns without paying income tax or capital gains tax on their earnings. There are several types of ISA’s available to investors, and each has its own limits and rules.

Cash ISA

Cash ISA’s let you save up to £20,000 a year tax-free, and the interest that’s earned is also tax-free. The average returns for cash ISA’s are typically low, as they are considered low-risk investments.

Stocks and Shares ISA

Stocks and Shares ISA’s allow investors to invest in stocks, shares, and various other investment products. They also have a £20,000 limit, but their performance is subject to market risks.

Innovative Finance ISA

Innovative Finance ISA’s (IFISA) are a relatively new type of ISA that allow investors to lend money to borrowers through peer-to-peer lending platforms. The returns on IFISA’s can be high, but they come with greater risk.

Directors Loan ISA and IFISA

One type of IFISA is the Director’s Loan ISA, which is available exclusively from rebuildingsociety.com. This platform enables investors to lend money to businesses while also enjoying tax-free returns.

The IFISA works by enabling investors to lend money to borrowers through peer-to-peer lending platforms, such as rebuildingsociety.com. These platforms then invest the money into various businesses or properties.

The IFISA is regulated by the Financial Conduct Authority (FCA), and many platforms are also members of the Peer-to-Peer Finance Association (P2PFA).

It is important to note that investing in IFISA’s can come with greater risks and it is not suitable for all investors. It is crucial to seek professional advice before investing.

The benefits of IFISA’s include tax-free returns and the ability to invest in businesses or properties that may provide higher returns than traditional investments.

However, investors should consider the risks aspect of investing, such as the possibility of losing their capital, the lack of liquidity, and the reliability of the companies or borrowers they lend their money to.

In conclusion, IFISA’s are an innovative way to invest and save tax-free earnings. Individuals should undertake thorough research and seek professional advice before investing to make an informed decision.

steve@bicknells.net

Sole Directors – time to change your model articles – Hashmi v Lorimer-Wing 2022

UK Companies are normally formed using model articles, they are contained in the Companies Act 2006 and replaced the previous Table A articles.

Model Articles were designed a ‘one size fits all’ solution and until now pretty much everyone including sole director companies have adopted them. The recent high court judgement has changed that!

In the model articles section 11(2) states

The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two.

Model articles for private companies limited by shares – GOV.UK (www.gov.uk)

The case of Hashmi v Lorimer-Wing 2022 was the result of a dispute between directors, leaving the company with one director. The High Court Judge decided in the case that Model Articles are not suitable for single director companies.

What should sole director companies do now?

Appoint another Director

It sounds obvious but might not work for everyone, the company probably has a sole director for a good reason so appointing another director isn’t probably a good idea?

Change the Articles

Assuming you don’t appoint another director, then you have to do this. Following the High Court decision hundreds of thousands of companies will now be doing this. But it won’t fix decisions already taken by a sole director!