Are protected cell companies back in fashion?

Protected cell companies (PCCs) have been around for over 20 years. In simple terms, a PCC is a single company which has separate and distinct ‘cells’, with each cell effectively operating like a stand-alone company. Various jurisdictions have introduced company law to recognise them, and in most cases, they are not subject to local tax on income or gains arising within them.

What PCCs are used for

In the private wealth space, PCCs have traditionally been used by family offices to hold assets in different ‘pots’ within a single structure. But there is a different use for PCCs.

PCCs can have multiple cells held by unconnected parties. This means that, if properly established with appropriate shareholdings, a PCC may not be a ‘close’ company for UK tax purposes. Under UK tax rules, capital gains made by non-close companies are only taxable at the corporate level and are not attributed to shareholders, unlike gains made by non-UK close companies.

This all means that where an offshore PCC makes a capital gain, it is often the case that neither the company nor the shareholder will be taxed on it at the time it arises. Instead, the gain is only taxed when it is distributed, or when the cell is effectively wound up. As a result, disposal proceeds can be reinvested gross, giving a better opportunity to grow assets over time.


In recent years many individuals have established onshore personal investment companies (PICs) or family investment companies (FICs). The main purpose of these companies is as an effective tool for passing wealth to the next generation while maintaining a suitable element of control over it, but they can also be used to capture investment returns, both income and capital, at corporate tax rates, which are generally lower than personal tax rates.

However, from 1 April 2023, the main rate of UK corporation tax, which applies to PICs and FICs, is set to rise to 25 per cent. Whilst this means that income received by UK investment holding companies will still be taxable at a significantly lower rate than the highest UK personal income tax rates (between 39.35 per cent and 46 per cent depending on the nature of income and location of the taxpayer), the opposite will be true for capital gains. The personal capital gains tax rate is 20 per cent (excluding the 8 per cent surcharge that applies to gains on residential property and carried interest), whereas gains received by a PIC or FIC will be taxed at 25 per cent.

Not surprisingly, some PIC or FIC shareholders are therefore looking for alternative investment ownership structures.

One option might be to see if investment profiles can be changed from assets focused on capital growth towards high income assets. If this is not desirable, alternative options could be considered, including the use of a PCC.

However, using a PCC should be considered carefully before any planning is implemented. The problem is that, although a PCC can allow indefinite deferral of UK tax on capital gains, it is totally transparent for income tax purposes, meaning that income returns are taxable at higher personal tax rates.

Potential investors will also need to consider the cost of establishing a PCC, which is greater than for a traditional company, and their exit route. The simplest way to extract value from a PCC is by way of dividends, which are subject to income tax at up to 39.35 per cent if the shareholder is UK resident and domiciled, including deemed domiciled. In short, using a PCC may mean it is possible to extract growth in value more tax efficiently, but this could be far more complicated than other options and is not guaranteed.

To summarise, PCCs are a useful structuring option for certain private clients, but care should be taken to ensure the downsides are clearly understood and managed, as well as the upsides.

For more information please get in touch with Rachel de Souza, or your usual RSM contact.