Funding a family investment company: loan, shares, gifts or assets.

A loan stays the parents' money: the company owes it back and can repay it, tax-free as capital, whenever the agreement allows. The loan remains in the parents' estate until repaid or given away. Share capital is money the parents have swapped for shares, so getting it back means selling or redeeming those shares. Most family investment companies use a small amount of share capital and a larger loan.

No. A loan can be interest-free, and repaying the principal is not taxed as income. If interest is charged, it is a deduction for the company and taxable income for the lender, and the company deducts basic-rate income tax at 20% and accounts for it on form CT61 each quarter. Whether the CT61 rate moves when the savings rate rises to 22% from 6 April 2027 is not yet confirmed.

Yes, but the tax result depends on how. Waiving a loan owed by the company is a gratuitous transfer into a company, which is an immediately chargeable transfer rather than a potentially exempt one, to the extent it reduces the donor's estate. Assigning part of the loan to an adult child is a gift to an individual. The route needs advice before anything is signed, because the wrong step can create an unexpected lifetime charge.

The loan is an asset in the parent's estate, a debt owed to them, and normally counts at its value for inheritance tax until repaid or given away. The executors can leave it in place, call it in, or deal with it as the will directs. The company needs the cash or liquid investments to repay it, so we plan the loan terms, the wills and the investments together.

Yes. The parents might lend and subscribe for freezer shares, while an adult child subscribes for growth shares with their own savings or inherited money. Each subscribes at market value for their class, and each person's money stays identifiable. Where a parent gave the child the cash, the gift is a potentially exempt transfer if the child is an adult. For a child under 18, gifts from a parent raise the settlements issue, so the source of funds should be recorded.

Either can work, and the choice depends on how much the family wants out of the estate and when. Each gift of shares to an individual starts its own seven-year clock, so staged gifts spread the risk and can make use of annual exemptions. Staging means later shares may be worth more, which raises the value of each later gift. A loan can go in at once, because it is repaid rather than given away.

A little. Share capital and loan principal are not taxed in the company, and repayments are not deductible. If the company pays interest on a loan, it is a deduction in the company's non-trading loan relationships, set against the interest it receives. The main rules for the company, such as 25% on a close investment-holding company's profits, do not change with the funding route.

No. A private limited company has no statutory minimum share capital, so the shares can be issued for a modest sum and the rest of the funding is usually a loan. A small amount of share capital with a larger loan keeps the parents' access to their money through tax-free repayments. The price and class structure still need care, because the value at issue sets the starting point for later gifts and the growth shares' hurdle.

You can, but it is a disposal at market value for capital gains tax, even if no or low consideration is paid, because the company is connected to you. Any gain is taxed at 18% or 24% at your own rates. That cost is why many families fund with cash, or move assets in only when the gain is small. Stamp duty can also arise, depending on the asset and the consideration.

Property can be moved in, but moving it is a disposal at market value, with capital gains tax for you and stamp duty land tax for the company at the higher company rates. It is often moved in after a prior property incorporation, where the right conditions are met, and sometimes the family uses cash and buys new property through the company instead. Our sister firm Property Tax Advisory advises on that first step before the property goes in.

You can, but interest relief is usually not available. Income tax relief for interest on a loan used to buy shares in, or lend to, a close company is denied where the company is a close investment-holding company, which a portfolio family investment company normally is. A property-letting company that is not a close investment-holding company may qualify where it lets property commercially, subject to the material interest conditions and the cap on income tax reliefs. Take advice before borrowing for this purpose.

Yes. Parents can top up the loan at any time, or the company can issue more shares, subject to the articles and the shareholders' agreement. Additional loans stay in the parents' estates like the original. New shares for the children are issued at market value, with any gift of cash behind them treated as before. We design the documents so that top-ups are simple, and record each one in the board minutes.

We work back from what the family wants. How much access to the capital do the parents need, how much should leave the estate, who will hold the shares, and what assets are already available? A loan keeps access but stays in the estate. Gifted value for shares moves value out but gives up access. Assets add capital gains tax and stamp duty land tax. The mix is case by case.

Yes, and many blended structures do. Each generation can lend and hold their own class of shares, so the loans and any gifts are separate and each person's estate is dealt with on its own terms. Gifts from grandparents to minor grandchildren are generally outside the parental settlements rule, though a parent supplying the money or a reciprocal arrangement can bring it back in. The documents should record who put in what.

Quite flexible, because it is your own money. A loan agreement can make the loan repayable on demand or by instalments, and the company can repay as much or as little as it has available, subject to its cash and the directors' duties. Repayment is not taxed as income. Our loan repayment planner shows how equal tax-free repayments reduce the loan left in your estate over time.

At least the amount, whether interest is charged and at what rate, when and how the loan is repayable, what happens on the lender's death or the company's insolvency, and whether the loan is secured. It should be signed before the company invests the money, and the board should minute each repayment. The agreement needs to be consistent with the articles and the rest of the plan, so we agree it with the solicitor.