HMRC closed down their “secret” specialist unit that was set up to review family investment companies (FICs) last month, concluding that they found no evidence linking the use of FICs with inheritance tax (IHT) noncompliance. The unit began its investigations in 2019.
The use of FICs accelerated since 2006 as an alternative to trusts (the tax rule change then enabled a 20% upfront IHT charge for the traditional family trust approach, making them instantly less popular). Similarly, FICs allow the transfer of wealth to other family generations without full transfer of control during the owners’ lifetimes—but without the upfront cost. A dedicated team looking for excessive tax avoidance will no longer deal with FICs, which will be treated as “business as usual.” In other words, business valuation experts can expect to see more wealthy clients using FICs in the foreseeable future for succession planning and wealth-holding structures.
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