How Family Investment Companies Can Complement a Gift with Reservation of Benefit Strategy 

Effective estate and tax planning is essential for high-net-worth individuals in the UK. Two tools often used to preserve wealth and minimise inheritance tax are family investment companies (FICs) and gift with reservation of benefit (GROB) arrangements. When used strategically, these structures can complement each other, allowing families to manage assets efficiently while retaining control and maximising tax reliefs. 

Understanding Family Investment Companies 

Family investment companies are private limited companies set up to hold and manage family wealth, such as property, investments, or cash. They allow the family to retain control over assets through shareholding while benefiting from corporate tax rates, which are typically lower than personal income tax. By placing assets into a FIC, parents or senior family members can protect wealth for future generations while maintaining influence over how it is managed and distributed. 

The Role of Gift with Reservation of Benefit 

A gift with reservation of benefit occurs when a person transfers assets to someone else but continues to enjoy some benefit from those assets. Common examples include gifting a property while still living in it or transferring shares but retaining the right to income. While GROB can reduce the immediate tax liability, HMRC rules ensure that the value of retained benefits is still taken into account for inheritance tax purposes. 

By understanding how gift with reservation of benefit works, families can structure transfers carefully, ensuring that the assets placed in a FIC are appropriately valued and that tax obligations are managed efficiently. 

How Family Investment Companies Complement GROB 

Family investment companies can be an effective companion to a gift with reservation of benefit strategy. For instance, shares in a FIC can be gifted to children while parents retain certain rights, such as dividends or control over decisions. This approach allows families to benefit from corporate tax efficiencies and retain influence, while also complying with HMRC rules regarding GROB. 

Using FICs in conjunction with GROB planning enables: 

• Controlled Wealth Transfer – Assets are transferred to younger generations while retaining oversight. 
• Tax Efficiency – Corporate tax rates in a FIC are often lower than individual rates, reducing overall liability. 
• GROB Compliance – Structuring gifts through a FIC ensures that any retained benefits are transparent and correctly accounted for. 
• Long-Term Planning – Families can plan for succession while minimising inheritance tax exposure. 

The Importance of Professional Guidance 

Both family investment companies and gift with reservation of benefit arrangements involve complex rules. Mistakes can lead to unintended tax consequences or penalties. Seeking expert advice ensures that your FIC is structured optimally and that any GROB arrangements comply with HMRC regulations. 

Conclusion 

When used strategically, family investment companies can complement a gift with reservation of benefit strategy, allowing families to transfer wealth efficiently while retaining control and maximising tax reliefs. Proper planning and professional guidance are crucial to navigating the complexities of inheritance tax and corporate structures.