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Family Investment Companies versus Discretionary Trusts for IHT planning

5 min read 27 Oct 22

Family Investment Companies don’t trade; they invest. Accordingly Inheritance Tax (IHT) ‘Business Property Relief' will not be available to shareholders. Nevertheless, they can be used by High Net Worth individuals for IHT planning. On this session, Graeme Robb, Senior Technical Manager explained why they can be used as part of an IHT planning strategy, and how they compare to discretionary trusts which have traditionally offered flexibility for IHT planners.

Following the session you should now be able to:

  • Understand how Family Investment Companies and Discretionary Trusts work
  • Explain the respective merits of utilising Family Investment Companies and Discretionary Trusts

To claim your CPD certificate, test your knowledge with the questions below.

Write down your answers to each of the following questions and check your answers when you click through to claim your CPD certificate on the link below.

Test your knowledge

1) What is the position with the IHT Nil Rate Band & Residence Nil Rate Band?

a. Both have been frozen up to and including 2023/24

b. Both have been frozen up to and including 2024/25

c. Both have been frozen up to and including 2025/26

d. Both have been frozen up to and including 2026/27

 

2) Shares in a Family Investment Company…

a. Always qualify for IHT Business Property Relief

b. Cannot be gifted outright

c. Do not qualify for IHT Business Property Relief

d. Must be quoted on an overseas stock market

 

3) A client who made a PET last year of £100,000 now wishes to make a gift into a discretionary trust but without incurring lifetime IHT. Assuming the annual exemption is otherwise used, what is the maximum gift that can be made?

a. £325,000

b. £225,000

c. £100,000

d. £425,000

 

4) An investment bond inside a company is taxed under…

a. The loan Relationship rules

b. The Chargeable Event rules

c. Capital Gains Tax rules

d. Income Tax rules

Claim your CPD certificate here. 

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