Holding CompaniesBusiness Asset Protection

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.

Why set up a holding company?

Ring-fence key assets of the 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.

Sell the business tax free

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%.

More Holding Company benefits

meeting discussing tax on sale

Tax relief for multiple businesses

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.

Inheritance Tax (IHT) reliefs

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.

Shared costs

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.

Holding CompaniesHow they work

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.

Learn how Shorts has helped clients successfully set up a holding company

Holding Company Success Stories

  • McClure Timber Supplies

    "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"

Check your eligibility today

At Shorts, we regularly advise on the benefits of creating a group structure via a holding company.

The benefits include reduced risk, asset protection, sharing central service and admin functions between different businesses, and some tax benefits.

We have built a bespoke eligibility tool to help you determine whether a Holding Company is right for you and your businesses.

 

Check Eligibility

Holding Company FAQs

  • What is the definition of a Holding Company?

    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.

  • Why would I set up a Holding Company?

    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.

  • How do you structure a Holding Company?

    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.

  • What are the benefits of a Holding Company?

    As highlighted above, the main benefits of a holding company are:

    • Ring-fence key assets of the business
    • Sell the business tax-free
    • Allow multiple businesses to benefit from tax relief
    • Allow the shareholders to benefit from certain Inheritance Tax reliefs
  • What is a subsidiary?

    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.

  • How long does it take to implement a Holding Company?

    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.