What does a family investment company have to file every year?

A confirmation statement, a corporation tax return and, unless it is exempt, annual accounts at Companies House. The company must also keep its statutory registers, accounting records and a record of its directors' decisions. Unlimited companies can often be exempt from filing accounts publicly, subject to conditions.

Who is responsible for a family investment company's compliance?

The directors. Even where an accountant carries out the filings, the directors remain legally responsible for the accounts, the returns and the registers, and for keeping the accountant informed of changes.

How often should dividends be paid?

There is no required frequency. Dividends can only be paid from distributable profits, and the right timing depends on the shareholders' tax positions, the company's cash needs and the anti-avoidance rules. Many FICs pay little or nothing for long periods, which is part of how the structure works.

How often should a family investment company be reviewed?

At least once a year. Tax law and HMRC practice change, family circumstances change, and the shareholders' agreement may need updating for births, deaths, marriages and divorces. A regular review is how a FIC stays fit for purpose.

Running a Family Investment Company: A Guide

A family investment company (FIC) is easy to set up compared with how long it has to be run. The company may last for decades, and the decisions made in its first year, about share classes, loans and dividends, shape everything that follows. This guide covers what running one involves.

It is general information, not tax or legal advice.

The directors' responsibilities

A company is run by its directors, and the founders are usually the directors. They have legal duties: to act within the company's powers, to promote its success, to use independent judgement, to exercise reasonable care and to avoid conflicts of interest. Where a director is also a shareholder and a family member, those duties need to be kept in mind.

In practice the directors:

make the investment decisions, within the policy they have set;
decide whether and when to pay dividends and to repay loans;
keep records: minutes of decisions, the registers, and accounting records;
ensure the company meets its filing and tax deadlines;
and report to the shareholders as the shareholders' agreement requires.

Directors remain responsible even if an accountant carries out the filings.

Accounts, tax returns and filings

Each year the company usually needs:

Annual accounts, prepared from the accounting records. Companies House requires most companies to file them, and unlimited companies are often exempt, subject to conditions.
A corporation tax return and payment, normally due nine months after the end of the accounting period.
A confirmation statement, confirming that the information at Companies House, including the shareholders, is correct.
Updates when directors, shareholders or people with significant control change.

Missing a deadline can bring penalties, and the information filed is public, so it is better to get it right the first time.

Dividends and loans

The two flows that matter most are dividends and loans.

Dividends may only be paid from distributable profits, must follow the rights of each class of share, and need proper paperwork: a board decision, and a record of the amount and recipients. The timing is worth planning, because the tax falls on the shareholder and depends on their other income.
The founders' loan is tracked in the accounts, and repaid when the company has the cash and the founders want it. Repaying a genuine loan is not a dividend, but the arrangements should be documented and kept consistent with the tax planning.
Loans to shareholders can trigger a tax charge if not repaid on time, and a family company should avoid them unless advice supports them.

Investment oversight

The company's purpose is to invest, and its directors should have an investment policy that records what the company may invest in, how risk is managed and who decides. Advice on investments comes from someone authorised to give it. The directors' job is to set the framework and monitor the results, and the accounts and reporting are how they do that.

Reporting to the family

A FIC is a place for the family to see its wealth. Useful reporting shows:

the value of the portfolio and its breakdown;
performance over time;
income, gains and the tax position;
the loan account and any dividends paid;
and how the company fits within the family's wider wealth.

In TributomOne, our platform, a family investment company is another entity in the family's ownership structure. Its investments and its shareholders are recorded in the same register as the family's other assets and rolled up through the ownership chain, so the family sees one consolidated picture rather than a set of separate reports. See family office reporting software.

Governance and review

The shareholders' agreement sets the rules, and the family should treat it as a living document. A good rhythm is:

an annual meeting of directors and shareholders to review the year, the investments and the dividend plan;
an annual tax and structure review, because the rules and the family both change;
and a trigger list for updates: births, deaths, marriages, divorces, a founder losing capacity, and changes in the law.

How we help

Our family investment company service includes ongoing support after the set-up: annual accounts and corporation tax, Companies House filings, investment company tax planning, dividend planning and regular strategic reviews. If you are running a FIC already, we can take over the accounts and tax and review the structure.

Running a family investment company: accounts, dividends and governance