Funding a Family Investment Company and transferring assets in

The founders pay cash to the company in exchange for shares. Because this is a commercial subscription at value rather than a gift, there is no lifetime inheritance tax entry charge. The capital becomes the company's permanent share capital, and getting it back out means dividends, a formal capital reduction or a share buyback — each with its own tax treatment and paperwork.

The more flexible route is for the founders to lend cash to the company and credit it to a director's loan account. The company invests the money; the loan sits as a debt owed back to the founders.

• Repayments of the loan capital come back to the founders tax-free, because a return of capital is not income.
• This is often how founders draw on the structure in retirement without triggering dividend tax.
• Interest is optional. If the company pays interest, it is taxable income for the lender and the company must operate the quarterly CT61 return.
• The loan stays in the founders' estate at face value for inheritance tax, so it is not a planning tool in itself.
• Document it properly with a written loan agreement and clear terms; an undocumented balance invites argument with HMRC.

In practice most families use a blend: a modest share subscription to establish the share structure, with the bulk of the capital lent in so it can be recovered flexibly.

Moving assets you already own into the company is a disposal at market value for capital gains tax. That applies even though you control both sides of the transaction.

• Listed shares and funds: gains crystallise on transfer, so consider staging transfers across tax years or using the annual exempt amount.
• Cash: no capital gains consequences, which is why funding with cash is far simpler.
• Trading company shares: incorporation-style reliefs and holdover relief are highly fact-specific and rarely available for a pure investment holding.
• Loss positions can sometimes be used to offset gains realised on the same transfer.

Transferring UK residential or commercial property into a Family Investment Company is usually the costliest route in, and it needs modelling before anything is signed.

• Stamp Duty Land Tax is payable by the company on the market value, and companies buying residential property face the higher rates plus, above the threshold, the 15% flat charge unless a relief such as property rental business applies.
• Capital gains tax arises on the transferor at market value, with the residential rate applying to dwellings.
• Existing mortgages typically need lender consent and refinancing onto commercial terms, which carry higher rates and arrangement fees.
• Incorporation relief can be available where a genuine property business is transferred, but the bar is a real business rather than passive holding.
• For new acquisitions the arithmetic is very different: buying inside the company from the start avoids a second set of transfer costs.

• Model the tax cost of every funding route before incorporating anything.
• Incorporate with a share structure that reflects who should hold control and who should hold growth.
• Adopt bespoke articles and a shareholders' agreement covering transfers, exits and family events.
• Fund with cash by subscription and loan, and document the loan account.
• Move existing assets in only where the tax cost is justified, staged across tax years where that helps.
• Open the company investment account and put the investment policy in writing.