Freezer Shares – Are They Right for You?
Freezer shares explained
Freezer (or “growth”) share structures are often promoted as a way to reduce future Inheritance Tax (IHT) exposure.
They work by freezing the current value of a company in one class of shares, usually held by the founders, while new “growth” shares capture the future increase in value, typically for the next generation or a family trust.
In theory, it allows business owners to lock in today’s value for IHT and pass future growth outside the taxable estate.
In practice, getting it wrong can trigger large tax liabilities upfront.
The problem with ‘zero value’ growth shares
Over recent years, many freezer share and Family Investment Company (FIC) arrangements have been sold with the promise that the new growth shares have “zero” or “nominal” value when created.
That claim is fundamentally flawed.
Under IHTA 1984, s.160, HMRC values all assets at their open market value, that is, what a hypothetical buyer would pay.
If the new growth shares have any realistic prospect of value (which they almost always do), then a chargeable lifetime transfer (CLT) arises when they are issued or gifted to others.
At the same time, the founder’s existing shares have lost value, a classic “value-shifting” event under TCGA 1992, which can also trigger Capital Gains Tax (CGT).
The result?
Instead of saving tax, the founder may have created two immediate liabilities, one for IHT, one for CGT, before any inheritance planning benefit is achieved.
HMRC’s position and current scrutiny
HMRC expects open-market valuation at the date of transfer. If new growth shares have value, that can create a chargeable lifetime transfer for IHT and may engage CGT value-shifting where value moves from the founder’s shares to someone else.
Key risks include:
- HMRC challenging the day-one valuation of the growth shares.
- Undeclared CLTs, leading to interest and penalties.
- Loss of eligibility for hold-over relief (s.260 TCGA) because the shares were not properly valued.
- Failure to file an IHT100 return, extending HMRC’s assessment window to 20 years.
HMRC enquiries into FICs, LLPs, and growth share structures have intensified since 2022, and many clients are now being asked to justify valuations and report omitted transactions.
When freezer shares can still work
Freezer shares are not inherently flawed, the concept is legitimate when structured properly. What matters is the detail.
A compliant, defensible freezer share plan includes:
- A hurdle rate or threshold set at or above the current market value of the company.
- Independent professional valuation of both the company and the new share classes.
- Carefully drafted Articles of Association outlining dividend rights, voting powers, and redemption terms.
- Full transparency through IHT100 filings and, where appropriate, s.260 hold-over elections.
- A documented commercial rationale, such as succession planning, incentivisation, or asset protection, rather than pure tax motivation.
Done correctly, freezer shares can help families control future growth, smooth generational transitions, and retain business flexibility, all within the framework of HMRC guidance.
When they may not be right for you
Despite the appeal, freezer shares are not suitable for every family or company.
If your business has:
- High leverage or variable valuations,
- Multiple shareholders with different time horizons, or
- Assets likely to fluctuate (e.g. property portfolios),
then the “freeze and grow” model can become unstable or even counter-productive.
In these cases, other structures often provide safer, more flexible solutions.
Alternatives to freezer shares
At Bespoke Planning Solutions LLP, we design and implement bespoke structures tailored to each client’s goals.
Safer alternatives often include:
- Family Investment LLPs
- Holdco reorganisation with genuine growth shares
- Trust-based planning
What to do if you already have a freezer share structure?
If you were advised to implement a “nil-value” growth share or Family Investment Company, do not panic, most issues can be corrected.
Our team regularly assists clients in:
- Reviewing valuations to determine whether any immediate charge exists;
- Preparing late or corrective IHT100 returns;
- Restructuring the arrangement to make it compliant going forward;
- Liaising with HMRC to minimise penalties and secure certainty.
The sooner the issue is identified, the easier it is to fix.
Why clients trust Bespoke Planning Solutions LLP
Bespoke Planning Solutions LLP specialises in Family Investment Structures, LLPs, and Corporate Reorganisations.
Our team brings many years of experience and has successfully restructured numerous freezer share and FIC arrangements, helping clients stay compliant while preserving long-term tax efficiency.
We combine:
- Technical depth in IHT, CGT, and corporate law;
- Experience with HMRC enquiries;
- Independently insured, professional advice through regulated partners; and
- A reputation for clear, practical solutions that stand the test of scrutiny.
Speak to us about safer, tailored alternatives
If you are considering freezer shares, or have already implemented them, it is vital to understand the real tax position before HMRC does.
Let us help you protect your family wealth, comply with the law, and achieve your objectives safely.
📞 Book a confidential consultation today
Phone: 020 4614 9994