Why Offshore Family Investment Companies Are Back in Focus for International Clients
From 6 April 2025, the UK’s new inheritance tax (IHT) rules for long-term residents have significantly reduced the effectiveness of excluded property trusts. For international clients living in the UK, this shift has brought offshore Family Investment Companies (FICs) back into the spotlight as a compelling alternative for wealth structuring and succession planning.
What’s Changed?
Under the new regime, domicile will no longer be a connecting factor for IHT purposes. Instead, we will look at residence. Individuals who have been UK tax resident for 10 years or more will now be treated as long-term residents for IHT purposes. This means that assets held in excluded property trusts will no longer be protected from UK IHT once the settlor becomes long term resident.
Why Consider a FIC?
A FIC is a private company—often incorporated offshore—used to hold and manage family wealth. It offers a flexible and tax-efficient structure that allows clients to retain control while planning for the future. Key benefits include:
- Control with Flexibility: Clients can retain voting rights while passing economic value to the next generation through different share classes.
- Tax Efficiency: FICs are subject to corporation tax (currently 25%), which is typically lower than personal income tax or trust rates. Dividend income received by the company is often exempt.
- Succession Planning: FICs allow for structured and gradual wealth transfer, helping manage exposure to IHT and other personal taxes.
- Asset Protection: Properly structured, FICs can offer protection from divorce or creditor claims.
Is a FIC Right for You?
While FICs are not a one-size-fits-all solution, they are increasingly relevant for international clients who are long-term UK residents and looking for alternatives to traditional trust structures. As always, professional advice is essential to ensure the structure aligns with your personal goals and cross-border tax profile.
