Could your Corporate Structure be more Tax Efficient?

There are many reasons why it might be a good idea to cosider reorganising your Corporate Structure, and we explored some of these in our recent article.  A reorganisation can be achieved in a tax efficient manner, and often entirely tax-free.  Where there is a compelling reason to do so, we encourage companies and their owners to consider changing their corporate structure in order to achieve a particular objective.

In this second of two articles, we explore -

Our top 5 reasons to reorganise your Corporate Structure. 

1. Insert a Holding Company

A holding company can generally be inserted above a single company tax free, providing certain conditions are met. It is possible to obtain pre-transaction clearance from HMRC that this will be achieved tax free, so business owners can be certain of the tax position before proceeding. 

2. Complete a demerger 

A demerger achieves the separation of business assets or interests into standalone entities. It can be achieved in a number of ways including liquidation demergers, share capital reduction demergers and statutory demergers.  Which one will be most suitable will depend on the facts, but generally they can all be achieved in a tax efficient manner, and often tax free.   Again, it is possible to obtain pre-transaction clearance from HMRC that the potential subjective tax charges won’t apply, so business owners can be certain of the tax position before proceeding. 

3.  Hive down a trade into a subsidiary

One way to separate out a different business activity is to transfer the trade and assets into a new subsidiary company. This can be a way of allowing the subsidiary to be sold to a buyer, or simply to separate different divisions into different group companies.  Again, this can be achieved tax free if done correctly.

4.  Incorporate a dormant subsidiary

One simple way to form a group, to allow some of the reliefs to be available in future, is to incorporate a dormant subsidiary company. This can also be a way to protect a company name that you may want to use in the future.

5.  Incorporate your sole trader business

If you operate a sole trader or partnership business, it may be worth considering whether to incorporate this into a company. This has the benefit of providing limited liability protection, as well as the kudos of operating a limited company.  If done correctly, the incorporation can be achieved tax free, or result in a tax benefit both at the time of the incorporation and in respect of tax on future profits arising. 

These are just a few of the reasons why restructuring a business could be considered, and there are several other ways in which companies can look to reduce their corporation tax.  However, there is no substitute for discussing your objectives with a professional adviser, who can help to guide you through the benefits and pitfalls of any corporate reorganisation.  

We have helped many business owners restructure their businesses. so, if you would like to learn more about ways in which your business could be restructured, please get in touch for a no obligation discussion with a member of our business taxes team.

Other similar articles;

• What is a holding company?
• The Tax implication of Global Trade
• Ways to reduce Corporation Tax