A family investment company above (or alongside) a holding company

Yes. A family investment company can own the shares in your holding company, so the family's trading group sits underneath it. The usual routes are a gift, a sale or a share exchange. Each has different tax consequences, including capital gains tax on the shares moving and the effect on Business Relief, so the route is chosen after modelling the group. If the group already has a holding company, the family investment company simply becomes its shareholder, with the family owning the shares in the family investment company.

Above means the family investment company owns the holding company, so dividends travel up to it and the whole group sits under one structure. Alongside means the family owns both separately, and surplus cash reaches the family investment company in other ways, such as dividends, a sale of assets or fresh subscriptions. Above is simpler for moving cash but ties the investment side to the trading group. Alongside keeps them apart, which can matter for Business Relief and for a future sale.

Normally no. Dividends paid by a company that the family investment company controls are exempt from corporation tax, whether the receiving company counts as small or not. That lets cash move up to the family investment company without a tax charge on the way. The tax arises later, if and when the family investment company pays dividends to its own shareholders, who are taxed at 10.75%, 35.75% or 39.35% above their £500 allowance.

Often yes. The substantial shareholding exemption exempts a company's gain on selling shares where it has held at least 10% for 12 continuous months in the six years before the sale and the company sold is a trading company or the holding company of a trading group. The investing company no longer has to trade itself. The conditions are strict and tested on the facts, so we check them before any sale is agreed.

It is not compulsory, but you should consider it. Share exchanges into a new holding company are now subject to a main purpose test for shares issued on or after 26 November 2025, which asks whether a main purpose is avoiding capital gains tax or corporation tax. Advance clearance is available from HMRC for capital gains and, separately, for income tax on transactions in securities. We normally apply for both together where an exchange is part of the plan.

Usually yes. Companies are associated if one controls the other or the same people control both, so a family investment company run by the parents who also control the trading group will normally be associated with it. The £50,000 and £250,000 corporation tax limits are then divided between them. A family investment company holding portfolio investments pays 25% anyway, but the trading company's own small profits band can shrink.

They can. Shares in a company whose business is wholly or mainly being the holding company of trading companies can qualify, but shares in a company that mainly holds investments cannot. From 6 April 2026, 100% relief applies to the first £2.5m of combined business and agricultural property per person, and 50% above. Assets that are not used in the business, such as surplus cash, are excluded from relief, so the balance has to be watched.

The risk is that the company stops being mainly a holding company of trading businesses. If the portfolio of cash and investments grows to dominate, the whole company can lose relief, not just the surplus. Even short of that, assets not needed in the business are excepted assets and carry no relief. HMRC also looks across the whole group when testing trading activity, so cash moved up from the trading company still counts in that test.

It can. Moving shares to a company you control is a disposal to a connected person, treated as made at market value even if you receive nothing or little. A gain can arise even though no cash is received. A share exchange can sometimes be structured so no gain arises, subject to the main purpose test, and holdover relief can apply to gifts of shares in a trading company or trading-group holding company. Which route fits depends on the structure and your plans, so we model it first.

A gift of shares for no consideration does not usually attract stamp duty, and the transfer form generally does not need to go to HMRC. If the family investment company pays for the shares, or takes on or releases a debt, that counts as consideration and stamp duty is charged at 0.5% of it, rounded up to the nearest £5, with none due at £1,000 or less. The funding route therefore decides the stamp duty bill.

Not necessarily. Control of the business then runs through the family investment company's voting shares, which parents often keep, with growth shares held by children or a trust. Retaining votes is not of itself a gift with reservation, but benefit taken from gifted shares can be, so director pay and any buy-back rights need care. We design the voting and the family's role together, so it fits how your family actually makes decisions.

It can, so the exit has to be planned at the outset. The relief is for individuals selling shares in a trading company or the holding company of a trading group, held throughout the previous two years, at 18% from 6 April 2026 on up to £1m of lifetime gains. Shares in a family investment company that mainly invests do not qualify. A sale by the family investment company itself is a company sale, not an individual one.

Only within a group relationship. Group relief for losses needs a 75% link: one company a 75% subsidiary of the other, or both 75% subsidiaries of a third. Where the family investment company owns 75% or more of the trading company, that link can exist. Whether there are losses to share is a matter of the facts, and the family investment company's investment income and gains rarely produce them.

No. An investment company inside a group is usually a sister or subsidiary company that holds surplus cash and investments, owned by the same shareholders as the group. A family investment company is designed around the family: it has share classes that give children or a trust the future growth, and a plan for control and extraction. Some families use a group investment company first and later add a family investment company above it.

Usually the holding company, if you do not already have one, because it gives the group a clean top company to put under the family investment company. Doing the steps in the wrong order can add capital gains, stamp duty or clearance work. If a sale is coming, the order matters even more. Our sister firm holding-company.co.uk covers inserting a holding company in detail, and we plan both steps together.

It depends on the value and on what the family wants. The structure has set-up and running costs, so it tends to make sense where the group is worth a seven-figure sum or more, or where surplus cash and a succession plan are real issues. Families we work with range from about £1m to £50m. On a free first call we can tell you honestly whether the step is worth taking now, later or not at all.