Can a Family Investment Company hold the proceeds of a business sale?
Selling a business turns shares that may have qualified for inheritance tax relief into cash that does not. A Family Investment Company is one of the most common ways to reinvest that cash for the family while keeping control of it.
Why does selling a business change your inheritance tax position?
Shares in an unquoted trading company can qualify for Business Property Relief. From April 2026, 100% relief is limited to an allowance per person, with 50% relief above it. Once the business is sold, the proceeds are cash or investments and generally count in full for inheritance tax at 40% above the available nil-rate bands.
How does a FIC help after a sale?
- Founders lend or subscribe the proceeds into the FIC, which invests them.
- Children or trusts hold growth shares, so future increases in value build outside the founders' estate.
- The founders keep control as directors and voting shareholders.
- Loan repayments give the founders tax-free access to their capital over time.
- Retained investment returns pay corporation tax rather than higher income tax rates.
What should be planned before the sale?
- Capital gains tax: Business Asset Disposal Relief, where available, applies a lower rate on up to £1 million of lifetime gains — 14% for 2025/26 and 18% from 6 April 2026.
- Gifts of shares before a sale may qualify for holdover relief and BPR, but HMRC looks closely at arrangements made when a sale is already agreed.
- Share exchanges into a holding company need advance clearance and genuine commercial reasons to avoid anti-avoidance rules.
- Deferred or earn-out consideration needs careful handling in any structure.
Frequently asked questions
Yes. Founders commonly lend or subscribe sale proceeds into a FIC, which invests them while children hold growth shares.
Generally yes. Cash and investments from a sale do not qualify, so the estate's inheritance tax exposure usually increases.
Planning before the sale gives more options, but any steps must be commercial and properly advised, as HMRC scrutinises pre-sale arrangements.
Not on its own. The FIC is about investing the proceeds efficiently afterwards; CGT on the sale depends on reliefs such as Business Asset Disposal Relief.
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