The answer is yes, a family investment company (FIC) can buy property in England and Wales, offering potential tax benefits and asset diversification advantages for families. However, navigating the legal and tax implications requires careful consideration. This article explores the possibilities and key elements to understand before proceeding.
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For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of a family investment company buying property, and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
Benefits of Using a FIC to Buy Property:
- Tax Efficiency: Profits generated from property rentals within an FIC might benefit from lower corporation tax rates compared to individual income tax rates. However, consult a tax advisor for specific calculations and potential Inheritance Tax implications.
- Asset Protection: Holding property within an FIC can ring-fence it from personal liabilities, potentially shielding it from creditors in some situations.
- Succession Planning: FIC structures can facilitate smoother intergenerational transfer of wealth with potentially reduced Inheritance Tax liabilities.
- Shared Ownership and Income Distribution: Family members can be shareholders in the FIC, sharing ownership and rental income generated from the property.
Legal Considerations:
- FIC Formation: Ensure the FIC is properly established and registered with Companies House, adhering to all legal requirements and regulations.
- Capital Gains Tax: Be aware of potential capital gains tax implications when transferring property into the FIC and upon its eventual sale. Seek professional tax advice to optimize tax efficiency.
- Stamp Duty Land Tax (SDLT): Understand the different SDLT rates applicable to property purchases by companies compared to individuals, and factor these costs into your calculations.
- Annual Tax on Enveloped Dwellings (ATED): Depending on the property value and ownership structure, the FIC might be subject to ATED, an additional annual tax on high-value residential properties held by certain entities.
- Borrowing Restrictions: FICs face stricter borrowing regulations compared to individuals, impacting your financing options. Seek professional advice tailored to your situation.
Additional Considerations:
- FIC Structure and Governance: Determine the most suitable FIC structure (limited liability partnership, limited company) considering your family’s needs and objectives. Establish clear governance rules and shareholder agreements.
- Management and Administration: Decide on the management and administration of the FIC, whether internally or through professional services.
- Financial Reporting and Compliance: Adhere to annual reporting requirements for Companies House and comply with relevant tax regulations.
Seeking Professional Advice:
Due to the complexities involved, engaging a solicitor is crucial. Their responsibilities can:
- Advise on the most suitable FIC structure: Considering your family’s circumstances and tax implications.
- Guide you through the legal and regulatory aspects of setting up and managing an FIC.
- Assist with property transfer and ensure compliance with SDLT and ATED regulations.
- Advise on tax optimization strategies and connect you with a tax advisor for tailored calculations.
- Draft clear and legally sound shareholder agreements and governance documents.
Conclusion:
While using a FIC to buy property offers potential benefits, careful planning and professional guidance are essential. Understand the legal and tax implications, consider your family’s circumstances, and seek expert advice to make informed decisions and navigate the process smoothly. Remember, a well-structured and compliant FIC can be a valuable tool for managing family assets and achieving long-term wealth goals.
How we can help
We have a proven track record of helping clients deal with the process involved in advising family investment companies. We will guide you diligently and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting. You can read more about the range of corporate services we offer by clicking here: https://blackstonesolicitorsltd.co.uk/corporate-legal-services/
How to Contact Our Corporate Solicitors
It is important for you to be well informed about the issues and possible implications of a family investment company buying property. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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