A holding company can be used to hold the valuable assets of a business such as property, equipment and cash. It protects your assets, helps you share costs, and brings tax benefits to your business.
We have inserted holding companies for many of our clients. We do this to protect assets like property, plant and machinery, cash, intellectual property and investments, from the risks of a trading company. A holding company can protect these assets from legal claims or a significant downturn in trade.
A holding company could allow the trading business to be sold tax-free. This works especially well if the shareholders do not need the cash on sale and would like to reinvest the proceeds. This could achieve a tax saving of between 10% – 20%.
Assets may be passed between subsidiary companies tax-free. This allows non-profit-making businesses to surrender their losses to profitable companies to enable quicker tax relief.
Ordinarily, an investment company would not qualify for Business Property Relief. If an investment company is coupled with a trading company, the group's entire value could be relieved from Inheritance Tax.
There may be admin and central services functions utilised by different businesses. These can sit within a holding company, which then makes charges to the subsidiaries. This means that the costs are shared appropriately amongst them.
A downturn in trade may put your valuable business assets at risk.
A holding company allows you to ringfence these assets. This means protecting them from creditors and other liabilities. The holding company is a separate parent company created to own a controlling interest in subsidiaries.
A holding company does not necessarily trade itself. Its primary purpose is to form a corporate group.
You can learn more about how holding companies work in our detailed guide.
"We sought advice on how to best tidy our companies up, and also on how to set up a holding company for the assets we held. Shorts were exceptional in creating a Holding Company for us and I’d have no hesitation in recommending them to any business needing to restructure in any way"
A holding company is a parent organisation that exists solely to own and manage controlling interests in other companies, called subsidiaries. It typically functions as an investment and management vehicle, and is not usually involved in producing goods or services itself.
Businesses acquire a range of assets over time, which are either used in the trade, such as commercial property or plant and machinery or have investments made from surplus profits. There are associated risks connected with trading companies holding their assets, but moving these assets into a holding company can minimise these risks.
Another company is inserted between the existing trading company and the shareholders, with the exact shareholdings as in the trading company. With the correct structure, this new company can be inserted without incurring any immediate tax charges.
The company’s assets are then transferred to the new company through sale or dividend. It is common for this to be tax-free with careful planning.
As highlighted above, the main benefits of a holding company are:
A subsidiary is a company that is owned or controlled by another company, known as the parent company. The parent company holds a majority stake in the subsidiary, giving it the authority to make decisions and exert influence over the subsidiary’s operations and management. However, the subsidiary typically operates as a separate legal entity, with its own management structure and financial reporting.
As part of the process, we seek clearance from HMRC for approval for the transaction before implementation so no surprising tax liabilities arise. HMRC can take up to 30 days to give clearance. Therefore, the project will typically take between 4-6 weeks.
