As a business grows, the amount it stands to lose if something goes wrong grows with it. A well-designed group puts a holding company above your trading company, so that your premises, surplus cash and brand can be held apart from the day-to-day trading risk, and if the trading side ever runs into trouble those assets are insulated from it. We build these structures properly, with genuine commercial substance behind them, and we will tell you plainly if one is not worth it in your case.
Most owner-managed businesses grow up inside a single limited company, so everything of value the business owns ends up in the same place as every risk it carries. That arrangement causes no difficulty until something goes wrong.
Let's fix itYour trading premises, built-up cash reserves and brand all sit in the same company that signs contracts, employs staff and could one day face a claim or insolvency.
You are thinking about selling part of the business one day, but you have no idea whether the structure you have will cost you dearly in tax when that day comes.
You have heard holding companies can protect assets and be tax-efficient, but you are wary of anything that smells like a scheme, and you want a straight answer on whether it is even legitimate for you.
You worry that reorganising now could trigger stamp duty, capital gains charges or an HMRC challenge, and nobody has explained the traps in plain English.
A group is an accepted commercial arrangement for separating value from risk, using genuine reliefs that UK tax law provides for that purpose, and it should not be confused with a tax avoidance scheme. A group structuring engagement with us covers the following.
We design a structure where your holding company sits above the trade and can hold property, surplus cash and IP separately. If the trading company ever fails, faces litigation or becomes insolvent, those assets are kept out of reach of its creditors. The arrangement is there to protect what the business has built up, and it does not involve any tax avoidance.
Dividends a UK trading subsidiary pays up to its UK holding company are, in almost all cases, exempt from corporation tax in the holding company's hands under the Part 9A distribution-exemption rules. So once the subsidiary has met its own corporation tax and has distributable reserves, it can pass surplus profit up to the holding company with no further corporation tax on the way up, moving it out of harm's way and ring-fencing it above the trade.
The Substantial Shareholding Exemption can fully exempt from corporation tax the gain when a company sells shares in a qualifying trading subsidiary, where at least a 10% holding has been held for a continuous 12-month period at some point in the six years before the sale, and the trading conditions are met. We plan structures so a future disposal of part of the group can qualify.
Within a 75% group, current-year trading losses in one company can be surrendered against another group company's profits, capped at the lower of the loss available and the profits to shelter (and, under the post-2017 rules, certain carried-forward losses can be surrendered too). A loss in one subsidiary can reduce the tax on a good year in another, so the group as a whole is steadier.
There are several traps here, and we do not gloss over them. Moving property between group companies can attract SDLT (relieved within a 75% group, but clawed back if the company leaves within 3 years), and moving chargeable assets can trigger a capital gains degrouping charge if a company leaves within 6 years. Putting a residential dwelling worth over £500,000 into a company can trigger the 17% flat SDLT rate on the way in, and an annual ATED charge (an annual tax on homes held in companies) each year it is held, unless a relief such as the property-rental-business relief applies. We map out every one of these time limits before you commit to anything.
Every structure we build has to rest on a real commercial purpose, because the anti-avoidance rules, including the transactions-in-securities rules and the company winding-up TAAR (an anti-avoidance rule aimed at liquidate-and-restart schemes), exist to catch arrangements whose main purpose is an unfair tax advantage. We keep you on the right side of that line and recommend HMRC clearances where they are relevant, and we will not take on anything that looks contrived.
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One fixed fee, agreed in writing before anything starts. No hourly billing, no surprise invoices, no clock-watching.
We do the switch, deal with HMRC, and keep everything filed on time. You deal directly with Bobby throughout.
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It is entirely legitimate when it is done for genuine commercial reasons. A group structure is the accepted way to separate valuable assets from trading risk, and HMRC's own guidance treats a group as a single economic unit for reliefs such as group loss relief. The test is whether there is genuine commercial substance, which means that the structure protects real assets or supports a real business plan instead of existing to manufacture a tax advantage. We only build structures that stand on their own commercial merit, and where it is useful we obtain HMRC clearances to confirm the position.
Your holding company sits above your trading company and can hold property, surplus cash and intellectual property separately from the company that does the day-to-day trading. Because those assets are owned outside the trading company, they are insulated from that company's creditors, litigation and insolvency risk. If the trading side ever hits serious trouble, the value you have built up elsewhere in the group is far better protected than if everything sat in one company.
Not necessarily, but there are real charges to plan around. Transfers of chargeable assets between group companies generally happen at no gain, no loss, and property moved within a 75% group can qualify for SDLT group relief. Both reliefs can be clawed back, however: SDLT relief is withdrawn if the company leaves the group within 3 years, and a capital gains degrouping charge can arise if a company leaves within 6 years. Putting a residential dwelling worth over £500,000 into a company also triggers a 17% flat SDLT rate on the way in and an annual ATED charge, unless a business-use relief applies. We map all of this out before anything is moved.
You can potentially sell a subsidiary without a corporation tax charge on the gain, thanks to the Substantial Shareholding Exemption. To qualify, the selling company must have held at least 10% of the subsidiary for a continuous 12 months within the previous 6 years, and the subsidiary must be a genuine trading company throughout. One important caution is that too much surplus cash or investment property in the company being sold can make it fail the trading test (HMRC treats more than about 20% non-trading activity as substantial), so ring-fencing and sale planning have to be balanced carefully. SSE also exempts only the company-level gain, and the personal tax you pay when you eventually extract the cash is a separate matter.
Often it is not, and we will tell you so. A group suits businesses with separable valuable assets, more than one trade, real third-party risk, or plans to sell part of the business. For a small single-trade company with few assets, the setup and running costs, the extra accounts and filings, the clawback traps, and the fact that each additional group company lowers your corporation tax marginal-relief thresholds usually outweigh the protection, and we would not want to sell you a structure you do not need. If you are unsure whether a group is right for you, the best starting point is a conversation with Bobby Gardiner (CAT FMAAT). We will go through your assets, your risks and the time limits that matter, and tell you plainly whether a group would earn its keep, for a fixed fee agreed before we start and before you spend anything on restructuring.
Book a free, no-obligation review. We'll show you where we can help, and what it'll cost, upfront.
