Are you Considering a Group Structure for your business?

But is it worth it?

Group structures and the incorporation of holding companies (‘HoldCo’s) are commonly used to safeguard assets and establish a more organised structure for future planning.

A holding company, also known as a HoldCo/TopCo or ParentCo, is formed to hold a controlling interest in subsidiary companies through a ‘share for share’ exchange.

What are some of the benefits?

Assets can be ring-fenced within the holding company to manage and distribute them efficiently, protecting them from creditors in the trading company.
The holding company is shielded from the losses, debts, or legal issues of its subsidiary companies. The structure can facilitate borrowing by allowing different lenders to be approached for each corporate entity. Group structuring ensures business continuity by safeguarding key assets even if the trading subsidiary faces challenges.
The Substantial Shareholding Exemption (SSE) can exempt the gain on the disposal of shares of a subsidiary company under specific conditions.
Dividends paid by subsidiary companies to holding companies are exempt from Corporation Tax, simplifying profit extraction and tax planning.
Group relief allows for tax benefits on transfers between associated companies, and SDLT group relief exempts SDLT on inter-group transfers.
Trading losses can be offset between companies meeting the conditions, providing tax relief.
Clawbacks can occur if property is transferred within a group and a subsidiary leaves the group within specific timeframes.

However there can be some drawbacks, which you must be aware of.
A group structure include complex administration, professional fees, CT payments, and management challenges. While a group structure can offer advantages in certain situations, but it’s essential to weigh the potential drawbacks.

Liquidators can review transactions within 2 years of insolvency, emphasising the importance of timing and careful consideration when inserting a holding company.
Seeking advice from a reputable Tax Advisor is crucial before restructuring to explore available tax reliefs.
If you are contemplating a group structure, consider consulting a Tax Expert for guidance on implementation and valuation.

Rachael Ball
LHP Accountants

Talk to your Tax Expert today.
01834 844743 |