Why should I use a family investment company instead of a normal limited company?

Your accountant has probably advised you that due to Section 24 of the Income Tax Act, especially if you have mortgages

Table of contents

Using a company to hold your rental portfolio

Why would you use a family investment company instead of a normal limited company for your rental portfolio?

Your accountant has probably advised you that due to Section 24 of the Income Tax Act, especially if you have mortgages, you should consider putting your properties into a limited company. If you were to do that, you would, firstly, set up a partnership, and then incorporate that partnership into a limited company. That advice does not go far enough as it only considers income tax and capital gains tax but not longer term inheritance tax.

We believe that family investment companies offer significantly better value than a normal limited company.

Benefits of using a family investment company for rental properties

Using a family investment company allows you to hold your property portfolio in a company, but with a slightly different, more beneficial set up and governing rules:

1) Alphabet shares - You can have different distributions of income to different people, which is frowned upon in a normal limited company. In addition, you can have growth shares in your children's names, and not accumulate any growth within the shares held by you. In doing so, the growth of the property portfolio is outside of your estate;

2) Entrenched directorships - When you set up a family investment company, you can change the rules of corporate governance so that you are allowed to be a director for as long as you live (together with your wife, if you are married). The benefit is that you control the assets for as long as you live and you control the profits of the company. You can decide whether to give your children income or not. To avoid IHT you can still give the shares away to your children, and those shares constitute a potentially exempt transfer (PET) of capital gains tax (CGT) issues;

3) Direct lineage rules - You can stipulate that only your children and grandchildren are allowed to be shareholders. That means the spouses of your children can not to be shareholders. If any of your children get divorced, the value of those shares is significantly reduced because nobody else is allowed to hold them. Usually, your children will be minority shareholders, and not directors so they have no control over who is able to benefit off the shares.

In conclusion

The benefits are that you could have entrenched directorships and you can have alphabet shares, which are two things that will make a massive difference to the taxpaying side of your family Investment company.

There are a number of benefits around a family investment company, making it a better family wealth investment vehicle than a normal limited company.

Join our Newsletter

Subscribe and get the latest updates about inheritance tax and Estate Planning into your mailbox.

We help people with over £1 million in current assets pay ZERO in UK inheritance tax

One stop comprehensive specialist advice - Tax, financial planning and legal advice service with 18 years experience.

What our clients say
Read our 159
    
reviews

"It is gratifying to finally come across an adviser who gives sensible ongoing advice which is very client focused."

Frank Hibberd

Retired gentleman

"It is nice to know that we can now be certain that our daughter will inherit our money without giving a large slice of it to the government ."

Tony & Sue Perriss

"Everyone's situation is different but having an initial discussion with Charles has really helped me personally navigate what can be a daunting subject."

Bobby Chadda

"I particularly want to thank you for the open and transparent manner in which you have serviced my tax planning needs since I first met you seven or so years ago. In arranging my tax planning through you, I have confidence"

Michael Mahon

Retired gentleman

"Charles was really helpful from the outset and quickly clarified our situation for us... I have used Bluebond for  IHT and other tax advice and they have been very helpful with both. Charles is a very experienced and knowledgeable individual and I highly recommend Bluebond's services."

Sam Attenborough

Retired gentleman

I have used Bluebond for setting up a discretionary trust for my children as well as inheritance tax and estate planning for my home and  other properties. Having searched for years, it was only after meeting and speaking with Charles that I felt confident enough to take these next steps, and I'm very glad I did. His ability to explain complex issues in simple terms and walk you through every step of the process is quite simply unparalleled.

Imran Qureshi

Excellent and comprehensive advice concerning all things financial in one place. Enthusiastic, Educational, Expert, value oriented, Professional and Polite are adjectives that come to mind as well as great attention to detail.

Deirdre Buckley

Inheritance tax is a minefield. Charles de Lastic of Bluebond Tax Planning is the best in the business at helping you to chart the path that is right for you to ensure your estate is structured in the most tax efficient manner.

Nicholas Dickinson

Charles provides clients with valuable insights that clearly demonstrate expertise built over the years. Charles and his team guided us through a estate planning journey and then addressing complex Inheritance Tax matters. They have been very transparent with their advice and cost. Overall an excellent service. Highly recommended

Shailesh Karia

The information contained in this web site is for UK consumers only.  Like most firms of solicitors and accountants, Bluebond Tax Planning is not regulated by the FCA. The content of this website does not constitute FCA regulated financial advice and all content is provided for general information purposes only. Bluebond is not responsible for any action you may take as a result of information on this site. All advice will be delivered on a personal basis once we fully understand your situation and our client agreements have been signed.

Copyright © 2024 Bluebond.co.uk
-
Copyright Notice
-
Legal Disclaimer
-
Terms & Conditions
-
Privacy Policy