Don’t make an awful year even worse…Separation and Capital Gains tax
The “secret” unit was created in 2019, when HMRC recognised that FICs had become an increasingly popular succession tool with high-net-worth individuals. The unit was to review the tax risks of FICs and in particular the associated inheritance tax (IHT) implications. The news of the unit only came to light following a Freedom of Information request, and its clandestine nature resulted in individuals reassessing whether a FIC was still an appropriate vehicle to set up and whether those who already had established FICs were going to be subject to attack by HMRC. However, since its creation little was heard about the unit or its activities.
Family trusts were the traditional vehicles used to achieve succession planning. However, FICs have become more increasingly more attractive over the last 10 years because of their structure and tax advantages.
A FIC is simply a private limited company that holds and manages investments. One of the main reasons for the use of a FIC is to protect family wealth for future generations in a tax efficient way. The benefits of a FIC are:
There are of course disadvantages so the structure needs to be carefully considered.
HMRC has quietly wound up the specialist FIC team, subsuming it into a wider unit. FICs will now be treated as ‘business as usual’ by HMRC, rather than be subject to the scrutiny of a dedicated unit. However, the government does not rule out bringing into play anti-avoidance rules for FICs in the future, especially considering the various small changes to the taxation of companies in recent years.
There is no ‘one size fits all’, however FICs can act as an effective succession planning vehicle where the structure is appropriate. In the meantime, those with FICs or planning FICs can proceed with a sigh of relief knowing the HMRC’s general view now appears to be that FICs no longer pose an investigative threat.
If you would like to discuss the use of trusts and FICs for your succession planning or have any other questions about this blog, please contact James Ward or Diva Shah.
James Ward heads the Private Client team at Kingsley Napley and is tasked with overseeing the continued development of the private client offering for both existing and new clients of the firm.
His objective is for the Private Client team to offer the highest quality legal, practical and commercial private client advice for both domestic and international families and individuals.
Diva Shah is an Associate in the Private Client team.
Diva acts for various clients including high net worth individuals, entrepreneurs, executors, trustees and individuals who lack mental capacity on a broad range of matters
Partner and Head of Department
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