With the UK tax treatment of trusts becoming ever more complex and less attractive, the attraction of family investment companies as a means to pass assets onto the next generation is increasing.
Family investment companies are bespoke corporate vehicles that rely on the creation of multiple share classes carrying pre-defined economic and voting rights. By separating out the various rights to vote, and the rights to participate in capital and income, families are able to provide the next generation with participation in the current and future value of assets without giving up control of their management.
For families who are tax resident in the UK, and for whom the creation of a traditional trust structure would result in immediate charges to inheritance tax, the use of a family investment company is particularly attractive. Properly structured, transfers of value to the company are usually considered to be potentially exempt transfers such that no inheritance tax is payable provided the donor survives seven years. The company itself must be tax resident in the UK, which is usually achieved by having a majority of directors in the UK and, as such, its profits will be subject to the UK corporation tax regime. Dividend income is often free of tax.
Traditionally, UK incorporated companies managed entirely by the family themselves have been used, but the use of a Jersey company and experienced service provider can provide the following additional benefits :
- Shares in a Jersey company are not considered to be a UK situs asset
- No tax in Jersey on income or gains
- No requirement to file annual accounts
- Greater flexibility in the event that the family leaves the UK
- Access to well regulated service providers experienced in international matters
At HIGHVERN we have 50 years heritage of assisting many of the world’s most discerning families with the creation and administration of innovative and effective estate planning solutions.