Overview
The Patel family, owners of a thriving £15m manufacturing business, faced a critical challenge: how to extract the value from their business while avoiding substantial taxes and maintaining control over their wealth. With succession on the horizon, they needed a strategy that would minimise tax burdens and preserve their family's wealth for generations.
Client Background
Client: The Patel family
Business: A £15m manufacturing company
Objective: To preserve wealth, minimise tax liabilities, and maintain control over the business and its future.
Challenges
The Patels were confronted with significant financial hurdles:
· Inheritance Tax (IHT): Over £6 million in potential inheritance tax exposure
· Capital Gains Tax (CGT): £1.5 million+ in CGT liabilities at the point of sale
· Personal Wealth Taxation: Wealth held personally would be taxed at rates up to 45% annually
· Estate Burden: The potential for a future tax burden on the next generation
They required a solution that would:
· Remove IHT risk
· Preserve long-term value of their assets
· Allow for a controlled sale of the business on their terms
Solution: The Family Investment Company (FIC) & Freezer Share Structure
With expert advice, the Patels implemented an innovative structure:
· Transfer of Business: The £15m business was transferred to a Family Investment Company (FIC) in exchange for £15m of Freezer Shares—preference shares with fixed value, offering no future growth participation.
· Employee Benefit Trust (EBT): The Freezer Shares were gifted to an EBT, effectively removing them from the Patel family’s personal estates and eliminating the IHT issue entirely.
· Phased Sale: Over three years, the company was sold in stages to a private equity firm. The sale qualified for Substantial Shareholdings Exemption (SSE), meaning no corporation tax or CGT on the exit.
Key Results
Full Control
The £15m sale proceeds remained inside the FIC, fully under the family’s control.
Reinvestment
Funds were reinvested into a conservative portfolio, earning 6%+ annually, generating £1m+ in investment returns per year.
Tax Savings
Limited tax was applied at 25%, not 45%, since profits were retained within the company.
Over £200,000 per year in income tax savings.
IHT Protection
The capital was permanently outside the family’s IHT exposure.
No CGT Liability
No CGT liability on future disposals due to the corporate structure.
Outcome: A Self-Administered Family Office
The Patel family successfully created their own tax-efficient family office with no personal ownership of capital shares. They achieved:
No IHT for Future Generations
With no personal ownership, future IHT liabilities were entirely removed.
No CGT on Future Disposals
The corporate structure ensured there would be no CGT liability on future asset disposals.
Control Maintained
The Patel family retained full control over their wealth and its management.
“Selling the business wasn’t the end — it was the beginning of a smarter family strategy. The FIC structure gave us clarity, control, and confidence that our wealth will last.”
