Family Investment Company Follow up

richallum

We had tow very good questions on the Howwow today (you can watch it again here) that John Hayley from Utmost has answered for us.

Q. As they are connected persons (family/business partners) would any losses realised be classed as 'clogged losses' - i.e. can only be used for carry forward reasons against gains made to transfers to the same persons?

A. It would certainly appear that this is the case and clogged losses could apply. When the parent gifts the shares this will be a obviously be disposal and individual CGT rules will comes into play. I don’t believe these rules are changed in any way because it is a FIC. As I said, it is just an investment company at its basic level and the individual is subject to CGT. As I said, if the shares are gifted very early in the process this would hopefully avoid any further complication on disposal by creating gains or losses. It obviously all depends on whether the founders are using the FIC simply as an investment wrapper subject to corporation tax or whether it is being used for legacy. I would be hard to see them surviving untarnished under a Corbyn government is this ever came to pass!

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14561

Q. Is there a benefit one way or another over a company being limited by shares, guarantee, or being unlimited?

A. As I said towards the end of the session, an unlimited company structure would certainly be worth considering over the other options, depending on the assets purchased. If the company were only holding investments then a limited liability doesn’t really serve any useful purposes. An unlimited company would have the added benefit of privacy and generally wouldn’t be required to provide accounts to Companies House by HMRC, as confirmed in the link below.
https://www.gov.uk/government/publications/life-of-a-company-annual-requirements/life-of-a-company-part-1-accounts

5.2 Unlimited companies
Unlimited companies need only deliver accounts to Companies House if, at any time during the period covered by the accounts:

• the company was a subsidiary undertaking or a parent of a limited undertaking
• the company was a banking or insurance company (or the parent company of a banking or insurance company)

or

• each of the company’s members was –
• a limited company
• another unlimited company each of whose members was a limited company
• a Scottish partnership each of whose members was a limited company

Colinstewart76

Thank you very much