I'm trying to get my head around how an FIC actually works - client has seen a webinar and has asked me to consider one for themselves. My understanding (and this is where the client is coming from) is that they are a useful means of getting excess cash out of a trading company and into the hands of the next generation, with associated benefits such as reducing risk of TradeCo's trading status being tainted by surplus cash. Ie a new company is set up to hold a special class of share in TradeCo, effectively giving NewCo a right to income and nothing else (so that the initial value of the shares is low). Dividends can then be paid on that special class, tax-free, to NewCo.
That all seems well and good, but - assuming NewCo's shareholders are different to those in TradeCo, does the payment of the 'special' dividends not fall foul of value-shifting?