A Family Investment Company (FIC) is a UK family holding limited company based in London whose shareholders are members of the same family. Like any other British company, an FIC is governed by English company law under the Companies Act 2006 and is registered at Companies House through the usual procedures.
The FIC is particularly attractive for families who are not resident in the UK, because the UK levies no withholding tax on outgoing dividends. Combined with the British holding privilege, this means that proceeds from the sale of shareholdings, for example, can reach the shareholders entirely tax-free if they live in a country that does not tax foreign dividends.
How it works in detail
An FIC works in the same way as any British limited company, and so it is by no means a cure-all. An FIC can, however, have tailored features that make it suitable as a vehicle for holding and controlling substantial family wealth (like other comparable structures such as trusts and foundations). FICs can have different share classes with different voting rights and economic rights to the distribution of profits or of assets on a liquidation.
FICs can be funded with cash (or other assets) through a subscription for shares, with debt (usually interest-free loans) or with a combination of equity and debt.
When bringing FICs into a plan, bear in mind that they can be structured to support asset protection and to meet the family's wishes and requirements. This can be achieved by many means, including tailored articles of association and shareholders' agreements, and through the number and type of shares each shareholder receives.
Special provisions can be written into the constitutional documents, such as restrictions on issuing shares and on transferring existing shares (for example on divorce or death). While the articles are public documents available at Companies House, shareholders' agreements do not have to be made public, so tailored provisions stay private.
Main advantages of the UK Family Investment Company
Anyone living in a low-tax country abroad, for example in Spain under the Beckham Law, knows the dilemma: withholding tax is almost always deducted from dividend payments. Rates of 15 to 35% (Switzerland!) are the norm.
It is worse still if your country of residence has no double tax treaty with the country the dividend comes from that reduces the withholding tax rate.
With your Family Investment Company you can save yourself these unnecessary taxes, because the UK in principle levies no withholding tax. Dividends can always be paid out free of withholding tax, wherever the shareholders live.
And thanks to the UK holding privilege, sale proceeds in the FIC are completely tax-free if the structure is set up correctly. So if you sell a shareholding for, say, €1 million, you can distribute the entire amount to your place of residence completely tax-free.
This makes the FIC especially well suited to clients who live in countries where dividends are tax-free or taxed at a reduced rate, but sale proceeds are not necessarily.
Last but not least: the UK has the largest network of double tax treaties in the world. This is particularly useful for receiving dividends from subsidiaries at low tax cost.
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