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Effective exits - insight

By Steve Brandreth, senior client partner, Artorius (Midlands UK)

In conjunction with other professional advisors, particularly corporate financiers, in the Midlands, I am experiencing noticeably increased activity involving business owners looking to structure an exit. 

Perhaps aware of possible changes to capital gains tax and/or entrepreneurs relief, this has been the catalyst to conversations about the structure of wealth once out of the company. The application of both trusts and family investment companies are therefore worth discussion.

What are they?

A family investment company is a company which is used as an efficient vehicle for estate planning, becoming popular following changes to the taxation of trusts (2006). They enable significant wealth to be passed on to future generations – while both protecting and retaining control over assets.

A trust is a legal arrangement where cash, property or investments are given to someone else so they can look after them for the benefit of a third person. Certain types of trust are taxed differently and involve a settlor (who places assets into the trust), trustee (who manages the trust) and beneficiary (who benefits from the trust). They are established to control and protect family assets, to pass on assets while the settlor is alive and to pass on assets when someone dies.

Advantages of these two structures

Disadvantages of these two structures

Key differences

Each structure will be ‘optimal’ in a variety of client circumstances. Clients’ objectives and priorities are reviewed alongside differing opportunities offered by FIC and Trust. The areas of divergence that often make apparent the different opportunities may be:

Adopting these structures in isolation or combination creates flexibility and choice in how and which assets are held, optimising tax efficiency of each structure. Both would seek to offer a degree of protection from divorce/bankruptcy. 

This is a complex area and requires both tax, legal and financial advice before implementation. Artorius work collaboratively with tax and legal advisers when analysing potential recommendations.

Potential applications

Important information

For information purposes only. The benefits and disadvantages described are subject to change, sometimes retrospectively. Artorius does not provide tax advice; any reference to taxation treatment is our current understanding and may change.

For further information contact Steve Brandreth on 0115 880 0602, 07810 334150 - Steve.brandreth@artorius.com

*This blog is part of a commercial package with Birmingham Business


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