What are the tax benefits of a Holding Company?

22 November 2021 David Robinson View all News

A holding company, sometimes referred to as a ‘parent company’, is a company set up to own a controlling stake in at least one subsidiary company – often more.

There are several strategic business benefits associated with a Holding Company, including protection of assets in the event of downturn in trade or legal claims against the company.

But what about tax?

There are some notable tax benefits and reliefs which are enabled by a Holding Company structure. In this blog, we will outline some of the most significant.

Tax reliefs for multiple subsidiary businesses

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Subsidiary companies owned by a holding company are able to pass assets between them tax free. This enables a subsidiary to move assets easily when required. Business within a group structure can also surrender tax losses to profit making group companies, which enables the profit-making companies to reduce its tax liability.

Selling the business tax free

A holding company structure could allow a trading subsidiary business to be sold tax free. If the holding company has owned at least 10% of a subsidiary company’s shares for 12 consecutive months or more, these shares can be disposed of without a Corporation Tax liability, under what is known as the Substantial Shareholding Exemption (SSE). This can be useful, for example, if the remaining Holding Company will use the funds to reinvest in the next venture.

Inheritance Tax Reliefs (IHT)

Business Property Relief (BPR) effectively reduces the value of assets which are subject to Inheritance Tax on transfer. Usually, a non-trading investment company (i.e., a Holding Company), would not qualify for BPR.

However, if a holding company is paired with a trading company within a wider group structure, with careful planning the full value of the group may be relieved from Inheritance Tax, including its investments.

Learn more about Holding Companies

Tax benefits and reliefs are not the only reason why a Holding Company structure may be a smart move for your business. The Shorts Business Taxes team has a wealth of experience in setting up holding companies in a group structure that is far more beneficial than a standalone company.

Whether you want to reduce risk, protect assets, spread costs, or reduce your tax liability, a Holding Company is something we recommend considering. Speak to our team today for advice tailored to your business.

Holding Company Resources

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