Home > Services > Personal Tax

Family Investment Companies

The term ‘Family Investment Company’ provides connotations of a special type of company.

Actually, it’s just a normal company which is owned by different family members with the purpose of investing (rather than a trade).

It can invest in anything which is legal, but typically that will be property (commercial, residential or holiday lets) and stocks, shares, and equity funds etc.

Tax Objectives 

Companies tend to be taxed at lower rates than individuals who have already used up their basic rate bands of income tax through their normal earnings.

That is why companies are utilised as vehicles for investment, because any investment gains/profits/interest are taxed at relatively low rates, meaning that there is more cash to reinvest (their investments roll-up quicker than individuals’).

Two further key tax points around FICS are:

  • Shares in a FIC will always be subject to IHT on death (which might not be the case for a trading company). Therefore, consideration around their shareholding is a vital part of the establishment and ongoing management of a FIC
  • Taking money out of the FIC for personal expenditure is likely to create further tax, so this needs to be managed


Shares in companies have three elements to their rights: –

  1. Voting Power
  2. Rights to dividends
  3. Rights to capital on a sale or winding up

Shares issued to individual family members can have have differing rights.  For example, a more senior member of the family may require voting rights (to provide the company with direction) but they may not need capital because they wish for the value in the equity to pass down to further generations.  Furthermore, if the shares in a senior family member do not have rights to capital then these shares have less value than full shares and so harbour a smaller IHT exposure.

So the conundrum here is to establish the shareholding of the company in a way that allows IHT mitigation but also the possibility of income.  It should also be borne in mind that an individual may be due a wage for services they provide to the company, and in such a case they may not need a right to dividend.

A key trap to avoid is capital gains tax.  If equity with material value is passed down the generations then this can create a CGT exposure.

Concluding Thoughts

Family Investment Companies often develop after money in a trading company is used to buy property and then the trade dies down or ceases.  In these cases, thought should be given as soon as possible to the shareholding structure and how equity / rights can be passed down to younger generations.

If a family decides to become involved with property investment for the long term, then a company often tends to be the most appropriate vehicle, with the company borrowing from the family members or a bank to make the acquisitions.  In such cases a detailed consideration of the shareholding and what interests can be held by younger generations will be important from the start.

Those involved with stock and shares could also use a FIC but because of the availability of pensions and ISAs their usage in such situations is less common.  If a portfolio already exists then resources could be lent to a FIC to start its investment activity but this will require careful consideration.


Tax Returns

Are YOU looking for a cost effective and seamless tax return service?

Do YOU want a tax EXPERT looking after your tax affairs?

Would YOU like comfort and clarity that your compliance obligations are met, and you will not receive any unexpected penalties.

All our clients’ tax returns are considered in detail by a Chartered Tax Adviser, yet our team is structured to prepare your tax return in an efficient and cost-effective manner.

For a LIMITED TIME we are offering 20% OFF* your first self assessment tax return. To claim YOUR discount, provide your details in the link below, and let us put you on the road to peace of mind.

*Offer open to new clients who sign up by 31 May 2020.

Do I Need To File a Tax Return?

Submitting a tax return may be necessary for a particular tax year (running from 6 April to 5 April) if you:

  • Disposed of assets resulting in a capital gain;
  • Were self-employed or in a partnership;
  • Received untaxed income (such as rental income or dividends);
  • Have income of more than £100,000;
  • Earn more than £50,000 and you or your partner claim child benefit;
  • Claim expenses or reliefs (such as employment expenses or relief for pension contributions);
  • Want to utilise tax efficient investments such as Enterprise Investment Schemes (EIS), Seed Enterprise Investment Schemes (SEIS), or Venture Capital Trusts (VCT);
  • Have foreign income;
  • Receive income from a trust or estate;
  • Live or work abroad or
  • Are non-domiciled in the UK;

This list is not exhaustive and some exceptions do apply.

Are you a company director?

Then you may have been informed that you are required to submit a tax return, even if you have no tax liability to report.  However, this is not the case, as our blog post on  the updated HMRC guidance  on tax returns for directors can explain in more detail. Having the position of director is not, on it’s own, reason to submit a tax return.



Investors' Relief

Investors’ Relief is available to investors on the sale of shares in unquoted trading companies purchased on/after 7 March 2016.

Provided that the relevant conditions are met, investors who realise capital gains on the sale of their shares will be liable to capital gains tax at a reduced rate of 10%, subject to a lifetime limit of £1 million per person.

This is therefore a valuable relief for investors and care should be taken to ensure that the you, the business, and the shares all meet the necessary requirements.


Gift Hold-Over Relief

A gift is a disposal for capital gains tax purposes. Therefore, you may have tax to pay on the gift of an asset even if you did not receive any money for it.

In light of this, Gift Hold-Over Relief is available in certain situations to roll over the gain against the base cost of the gift, effectively transferring the gain to the person who received the gift.

It is important to note that not all gifts qualify for Gift Hold-Over Relief; only qualifying business assets and gifts into trust will be eligible for the relief.


Principal Private Residence Relief

Principle Private Residence (“PPR”) relief is one of the more widely known tax reliefs, providing relief from capital gains tax on the sale of your home.

The level of PPR relief available is calculated by reference to the “period of ownership” and the “period of occupation” on a pro rata basis. With this in mind, where an individual has lived in their home as their main residence throughout their period of ownership, a liability to capital gains tax should not arise.

Complications arise where there are periods where the property was not occupied by the owner (e.g. because you left to work abroad or move in with a partner), or where you are residing in more than one property.

Therefore, where there is any doubt over whether PPR relief will be available in full, expert advice should be taken.

Lettings Relief

Where PPR relief is available on the sale of your home and you have let out the property to tenants, then additional relief may be available under Lettings Relief.

Up to 5 April 2020, Lettings Relief is available (up to a maximum of £40,000) where a property has been let as residential accommodation during a period of absence.

From 6 April 2020 onwards, Lettings Relief will be restricted to situations where the landlord is living in the same property as the tenant in shared occupation.


Property Taxes

If you are a landlord letting out property in the UK, then it is important to consider your responsibilities with respect to reporting income and/or gains on your property and paying any tax due.

By taking pro-active advice, you may be able to reduce your tax bill – particularly where you are selling property or considering expanding your property portfolio.

If you receive rental income from a tenant, either from a UK or overseas property, then you may be subject to income tax on your profits.  You may also be required to submit a Self Assessment tax return and report your income and expenses to HMRC.

We have assisted many clients in identifying their allowable expenses and helping them reduce their tax bills.

If you have been receiving rental income and have not reported it to HMRC, then you may be able to make a disclosure under the Let Property Campaign.

We can help you make this disclose and make sure you only pay the right amount of tax whilst minimising interest and penalties payable.

SDLT applies on the purchase of interests in land in England and Northern Ireland (Scotland and Wales have their own Land and Buildings Transaction Tax and Land Transaction Tax respectively– not covered here).

With recent changes to SDLT and the introduction of the 3% surcharge, many taxpayers are finding it increasingly difficult to determine if and how much SDLT they may have to pay.

Expert tax advice can make sure you don’t face an unexpected and unwelcome tax bill or overpay tax unnecessarily.

As your property portfolio grows, you may wish to consider the benefits and drawbacks of incorporating your rental business into a company.

Taking into account the rental income received, your personal circumstances, and your future intentions for the business, we can help guide you through this process and ensure that your business is structured in the most tax efficient manner in a way that suits you.

If you are thinking of selling your rental property, you may benefit from tax advice prior to the sale to ensure that the sale goes ahead in the most tax efficient way and that all available allowances and deductions are claimed.

When considering your liability to capital gains tax, we will always consider the availability of tax reliefs such as Principal Private Residence Relief (PPR) and Lettings Relief to make the most out of your sale.

If you are selling commercial property, then VAT and capital allowance considerations should also be taken into account.

Stamp Duty Land Tax: Further Reading

Stamp duty land tax (SDLT) was introduced in 2003* and since then has been subject to extensive reform.

SDLT is charged on the purchase of interests in land and is payable by the purchaser. It is calculated based on the consideration paid, and includes not only money but also money’s worth (e.g. the assumption of a mortgage).

SDLT is currently charged on a ‘slice’ basis (like income tax). This means that SDLT is charged at increasing rates for the amount of consideration that falls into the different SDLT bands.

Different rates apply depending upon whether or not the property is residential or mixed/commercial and whether the individual buying the property is an individual or non-natural person (e.g. a company).

Higher SDLT Rates

Since 1 April 2016, all purchases of residential properties have been subject to an extra 3% on SDLT in each band where the purchaser is either:

  • a non-natural person (e.g. a company), or
  • an individual who already has a dwelling and isn’t replacing their main residence.

These new rates are subject to a number of special rules and transitional provisions. Extra care must be taken when considering whether the higher rates will apply as these rules can catch taxpayers by surprise leaving them with unexpected tax bills or having paid the higher rates when they aren’t applicable.

Since 2012, a special rate of 15% on the total consideration may apply to the purchase of residential properties by non-natural persons in certain circumstances. This special rate is separate to the recent 3% increase to each SDLT band.

The threshold for this special 15% rate was originally set at £2 million but from 2014 has been reduced to £500,000.

* From 1 April 2015 land in Scotland is subject to the Land and Buildings Transaction Tax. From 1 April 2018 land in Wales is subject to the Land transaction Tax. Neither of these taxes are covered here.

The Problem

A husband and wife owned a portfolio of 28 rental properties comprising both residential and commercial properties.

They were keen to transfer the properties into a newly incorporated company but were unsure of the capital gains tax (CGT) and stamp duty land tax (SDLT) implications of the arrangement or the availability of reliefs.

The Solution

We set out the tax implications of the proposed transfer and calculated the estimated tax due.

We considered the availability of SDLT reliefs, with a particular focus on the “partnership exemption”. As part of this advice, it was necessary to examine whether there was a partnership in place and whether the activities undertaken amounted to a “business”.

In terms of the couple’s CGT liability, we determined the most tax efficient way to allocate losses and the availability of incorporation relief.

The taxpayers’ compliance obligations were also considered, such as the time frames for making the relief claims and reporting the transfer on their tax returns.

The Result

The level of activities carried on by the taxpayers in respect of their properties was significant, therefore there was a strong claim that incorporation relief would be available. As a result, the gain was deferred and there was no immediate charge to CGT on the transfer.

In terms of the SDLT partnership exemption, whilst the level of activities carried on were likely sufficient to amount to a business, as partnership returns had not been submitted and there was no partnership agreement there was a risk that HMRC would challenge the position that the couple ran their property business as a partnership. With this in mind, we provided advice on how they may be able to strengthen their claim.

We also considered an alternative scenario where the taxpayers did not make a claim for the exemption. Whilst the 3% surcharge would apply on the acquisition of the properties by the company, multiple dwellings relief should be available in respect of the residential properties to reduce the overall SDLT liability.



Whether you want to make contributions to your pension fund, or are already in receipt of a pension and unsure of the tax consequences, PD Tax can help you to understand the UK tax implications of pensions.

Pensions can be an efficient method of saving for many taxpayers as they benefit from a range of tax reliefs designed to encourage people to save for their retirement.  However these reliefs can come with certain restrictions based on things like your income, available annual allowance, and the amounts already saved in a pension.

We can assess your circumstances and help you understand the tax implications of your pension, including determining the maximum contributions that you can make whilst retaining your eligibility for relief and identifying any useful tax claims that can be made.

Alternatively, you may be keen to withdraw funds on retirement and are unsure of what tax you may have to pay. Taking into account your future goals, we can help identify the most tax efficient route to access your funds while ensuring that your objectives can be met.


The client was a member of a defined benefits pension scheme and the growth in their pension rights in 2015/16 exceeded their annual allowance for that tax year.

The excess growth gave rise to an income tax charge (aka an “Annual Allowance Charge”) which was overdue and needed to be disclosed to HMRC.


We immediately registered our client with HMRC’s appropriate disclosure facility to minimise the potential penalties payable.

We then provided our client with calculations showing the potential income tax, interest, and penalties payable, explaining how these would be disclosed to HMRC and providing instructions on how to pay the amounts due.

After our client fully understood the position, we prepared a full disclosure to HMRC explaining how the Annual Allowance Charge arose and why the minimum possible penalties should apply given our client’s mitigating circumstances.

Following the submission, we kept in regular contact with HMRC’s disclosure team to ensure our client’s disclosure was being processed correctly.


HMRC accepted the disclosure in full and imposed no penalties on our client.

The final amounts payable only included the income tax from the Annual Allowance Charge and late payment interest.

The client was very satisfied with the outcome!


Overseas Income/Gains

If you are resident in the UK and receive income or gains from overseas sources, it is important to consider whether it will be liable to UK tax, and if so, your compliance obligations.

In identifying your liability to UK tax, we will consider the impact of any Double Tax Treaties (if applicable) and the availability of any reliefs – particularly if the income or gains have already been subject to foreign tax.

If you are required to report and pay UK tax on your overseas income/gains, we can also assist in calculating the tax due and making all necessary submissions to HMRC.

Please note that we can only advise in respect of your UK tax liability, however we have connections with a number of non-UK tax advisors who can help you in relation to your tax liability in the overseas jurisdiction.

The Problem

Our client had undisclosed income and gains from a Swiss bank account and wanted to bring his tax affairs up to date whilst ensuring that the tax was calculated correctly and penalties minimised.

Our client was also concerned about the impact of the UK-Swiss tax treaty, under which he would have suffered a one levy of over £300,000 unless action was taken prior to 31 May 2013.

The Solution 

We provided advice and illustrative computations comparing the Swiss Tax Treaty with the Liechtenstein Disclosure Facility (LDF) and a voluntary disclosure to HMRC.

Following our clients decision to proceed with the LDF, we prepared detailed calculations of the UK tax liabilities, liaised with advisers in both Switzerland and Liechtenstein, provided a detailed analysis of the more complex areas of the disclosure and finally corresponded the disclosure to HMRC on our clients’ behalf.

The Result 

HMRC accepted our disclosure and the calculations of tax, interest and penalties without amendment.

We saved our client over £166,000 compared to the charge he would have suffered under the UK-Swiss Tax Treaty.

Specific benefits of making the disclosure through the LDF included:

  • Reduced rate of penalties as compared to a voluntary disclosure or unprompted HMRC enquiry/investigation
  • Guarantee of no criminal prosecution
  • Past tax liabilities brought up to date giving relief to our client and preventing an enquiry by HMRC

The Problem

Our client’s father established a foundation under the laws of a foreign country over a decade ago. The father was non-UK domiciled and had never lived in the UK.

The only assets held by the foundation were cash and investments which were managed by an overseas bank.

On the death of their father, our client (a UK tax resident) obtained an interest in the foundation, however our client was unsure what this would mean from a UK tax perspective.  In particular, our client was concerned that the foundation would be treated as a discretionary trust which would give rise to large tax liabilities.

Some months after the father’s death it was agreed that the foundation would be wound up by selling the assets investments and distributing the cash.

Our client therefore required assistance to understand the tax implications of her interest in the foundation and the proposed distribution, as well as compliance with UK self-assessment tax returns.

The Solution

The first step was to consider the tax treatment of the foundation from a UK perspective.

This is a tricky area because whereas foundations are often used in civil law jurisdictions, in common law jurisdictions such as the UK we tend to use trusts. Trusts and foundations may have some similarities, however there are a number of distinct differences which will vary depending on the country in question and the terms of the specific foundation.

After a detailed review of the deed and arrangements we determined that our client became absolutely entitled to the income and capital of the foundation immediately following the father’s death, and the foundation was in effect equivalent to a bare trust under English law.

This meant that our client was responsible for income tax and capital gains tax on the income/gains arising since the father’s death, and that there were no tax consequences in relation to the distribution of cash as this simply aligned the legal and beneficial ownership position.

The second step was to report the income/gains arising from the investments on our client’s self-assessment tax returns.  As part of this work, we considered our client’s UK tax liability on the receipt of overseas interest, dividends, gains from foreign exchange (FOREX) contracts and reporting/non-reporting funds.

The Result

Our client could rest assured in the knowledge that their tax return had been submitted and their UK tax affairs were in order.



Testimonial provided by Mr T in September 2013

The review that you initially provided of my situation allowed me to understand that it was probably going to be better to make a disclosure under the Liechtenstein Disclosure Facility (LDF) rather than suffer the UK-Swiss Tax Treaty one off levy. This certainly proved to be the case.

Your thorough and robust approach to the calculations and their presentation allowed me to make my disclosure in a confident manner and I was very pleased that HMRC did not enquire into the disclosure.

In general, I was delighted with the service and results delivered by Vikki and yourself.


Inheritance Tax Planning

So if you want to ensure your loved ones can benefit from your estate it’s important to plan for inheritance tax as soon possible, as procrastination on this matter is likely to cost you money.

Pro-active inheritance tax and succession planning can help protect your assets for the future and have a significant impact on the value of assets for your beneficiaries. We can provide you with a wide range of bespoke inheritance tax solutions, from inheritance tax and Will review services, to tailored tax planning for your estate (including trusts)

The type of inheritance tax planning devised will depend on the type of assets involved (i.e. property, cash, collectables, or business interests, e.g. shares) and, most importantly, your preferences for how and when your estate should be passed on.

The Problem

A landlord was keen to transfer his rental property portfolio to his children during his lifetime in order to mitigate inheritance tax, but was concerned that there may be significant capital gains tax implications on disposal.

The Solution 

After considering a number of different options, we concluded that a family trust route would be the most appropriate and tax efficient way to help our client achieve his goals.

This involved an outright gift of properties to the value of the annual exemption, meaning that no capital gains tax was chargeable on transfer.

We then arranged for our client and his wife to gift into trust the properties up to the value of their nil rate bands. The properties with the lowest gains in proportion to their value were transferred first so that they could benefit from an uplift in base cost, thereby reducing the capital gains tax liability on a future sale.

As our client intended to continue managing the properties, we suggested that he establish a property management company owned by him and his wife. They could then charge management fees to the trust and rental profits will be available through dividends.

The Result 

Provided that both clients survive seven years from the date of gift, the properties will be outside of their estates and they will have saved Inheritance Tax of approximately £260,000.

By extracting rental profits via a property management company, our client will continue to profit from the properties without invoking any anti-avoidance measures.

The Problem

The Will of a deceased’s estate with gross assets over £5 million contained complex provisions for determining the charitable legacy to be paid by the executors of the estate.

The executors and solicitors administering the estate needed assistance to determine the amount of the charitable gift.

The Solution 

After carefully examining the terms of the Will and the principles of the cases of Re Benham and Re Ratcliffe, we concluded that grossing up was not necessary to calculate the size of the residuary legacies and in particular the gift to charity.

As the charitable gift was more than 10% of the net estate, the reduced rate of IHT of 36% could be applied, saving the estate £170,000.

We also identified that a number of shares had been sold at undervalue and that loss relief could be claimed, saving a further £10,500.

The Result 

After finalising our calculation and the inheritance tax return, it became apparent that the estate had already overpaid inheritance tax and was, in fact, due a refund. HMRC duly issued a probate summery to the estate and the refund was issued shortly thereafter.


Capital Gains Tax

When considering your liability to capital gains tax, we will always make sure you can get the most out of the available allowances, reliefs, and deductions.

Where possible, it is good practice to obtain advice prior to selling or disposing of your assets as with careful planning it may be possible to reduce, defer, or mitigate capital gains tax due by taking action in advance. This is particularly important if you intend to leave the UK or arrive from overseas.

We can also prepare the necessary paperwork to report gains and losses to HMRC, so you can rest assured that you have met all your compliance obligations.

Common Capital Gains Reliefs

The Problem

The client inherited a property from her parents many years ago. She was keen to gift the property to her three children but was worried about having to pay capital gains tax on the gift.

As she had never lived in the property she was not eligible for private residence relief (PRR).

The Solution

We provided the client with an illustrative calculation of the capital gains tax she would suffer on the gift to her children assuming that no other steps were taken prior to the gift.

Once the level of the tax at stake was quantified we could provide the client with a number of solutions to mitigate the upfront capital gains tax cost including:

  • Payment of the capital gains tax by instalments over 10 years,
  • Living in the property as her main residence for a period of time prior to the gift so that part of the gain could be exempted through private residence relief,
  • Transferring the property into a discretionary trust for the benefit of her three children. The property could either be retained in the trust or the trustees could choose to distribute the property to the children.

The Result

The availability of holdover relief for transfers into and out of a discretionary trust meant that it was possible to transfer the property to the three children without incurring an immediate liability to capital gains tax.

A tax saving of over £25,000 as compared to an outright gift.