Holding Company FAQs

Owners of profitable UK trading companies and the families and advisers around them. Typically that's a company making £250k or more a year, or worth somewhere between £1m and £50m, whose owners want to protect surplus cash, separate property, add a second business, prepare for a sale or pass the business on. We also work with the accountants, solicitors and corporate finance advisers who look after those companies.

We design and implement holding company and group structures for owner-managed businesses. That covers putting a holding company over an existing company, the HMRC clearance applications that usually go with it, adding sister companies for cash, property or new ventures, taking profits out of a group, selling a subsidiary or the whole group, splitting a group, and planning for the next generation. We focus on structure and planning rather than annual compliance.

Both. Many clients come to us with a group that has grown up over the years, sometimes with companies that no longer fit, cash sitting in the wrong place or property held by the trading company. We review how the group works today, what it's costing in tax and risk, and whether a tidy-up, a split or a new layer would serve the owners better.

Before anything moves. The best time is when you first notice a reason, such as cash building up, a property you want to buy, a second business idea or early interest from a buyer. Structures put in place well ahead of a sale or a family change are usually simpler to justify to HMRC and leave more options open than ones arranged under time pressure.

Yes. Try not to sign heads of terms with a buyer, issue or transfer shares, move property or large sums between companies, set up a new company to own the existing one, or pay an unusually large dividend until you've taken advice. Each of these can close off options or create tax that's hard to undo. If something has already happened, tell us early.

It depends on the work, and we agree it in writing at the start. Restructuring advice is often given to the company and its shareholders together, because everyone's interests point the same way. Where they don't, for example when shareholders want different things from a sale or a split, it may be better for some shareholders to take their own advice, and we'll say so.

Talk to us anyway. Disagreements are common, and sometimes the restructure itself is the answer, such as a split that lets shareholders go separate ways. We can explain the options and their tax effects to everyone at once so the discussion starts from the same facts. We won't take sides between shareholders, and where interests clearly conflict we'll recommend separate advice.

Yes. Owners and their accountants often ask us to review a proposed step plan before it goes ahead, especially where a sale is in view or clearance is involved. We'll look at whether the steps achieve what you want, whether the tax analysis holds up under current law, including the 2026 changes to share exchanges, and whether anything has been missed.

Yes, and we prefer to. Your accountant knows the business and will carry on preparing the accounts and returns. We bring the specialist structuring work: the design, the clearance applications and the step plan. We share our analysis with them, agree who does what, and hand back a clear note of anything that changes in the annual compliance once the structure is in place.

Usually your solicitor, or a company secretarial provider for simpler steps. Share exchange agreements, board minutes, resolutions and Companies House filings are legal documents, and the tax analysis depends on them being right. We set out the steps and their order, review the drafts against the tax plan and confirm each step is in place before the next one happens.

Yes. Company law and corporation tax apply across the UK, so holding company structures work the same way wherever the company is registered. Scottish taxpayers have their own income tax rates on earnings, but dividends are taxed at the same rates across the UK. Property taxes on land transfers differ in Scotland and Wales, and we take that into account where property moves.

Our focus is UK companies and UK groups. Where a shareholder lives abroad, or the group has an overseas subsidiary, we can usually advise on the UK side and will tell you early where advice from a specialist in the other country is needed. Residence can change the answer significantly, so mention any overseas link when you first get in touch.

No. The answers here explain how the rules generally work for the 2026/27 tax year, in plain English, to help you understand your options and ask better questions. They can't take account of your company's history, your shareholders or your plans, all of which can change the answer. Before acting, take advice on your own facts.

Because, with holding companies, it genuinely does. Whether a relief applies can turn on how long shares have been held, how much cash a group holds, what a company was used for over several years, or why a step was taken. Two companies that look alike can get different results. We'd rather be clear about that than give an answer that turns out wrong.

Each page shows when it was last reviewed, and answers are written for the current tax year. We review the content after Budgets and Finance Acts and when HMRC changes its guidance. Recent examples include the new main purpose test for share exchanges and the changes to Business Relief from April 2026. If you spot something that looks out of date, please tell us.

This page groups questions by the page they come from, so the questions about clearances sit with the clearances page, those about selling sit with the selling pages, and so on. You can also browse the topic hubs in our insights, use the glossary for jargon, or try the tools to see the numbers. If you can't find your question, ask us directly.

Use this site for holding companies and groups. Demerger Tax (demergertax.co.uk) focuses on splitting companies and groups, Transaction Tax Partners (transactiontaxpartners.co.uk) on selling and buying businesses, and Property Tax Advisory (propertytaxadvisory.co.uk) on landlords and property companies. Our main practice is at www.aswatax.co.uk. It's the same firm behind each, so start wherever fits best and we'll join it up.

Yes. The first call is free, and it's a chance to ask your questions and get a sense of the options without committing to anything. We'll be honest if the answer is simple, if a holding company isn't the right tool, or if your accountant can handle it. Detailed written advice and implementation follow only if you decide to go ahead.

Advice is given on the law at the time, and a structure that was correctly put in place is generally judged on the rules that applied when the steps happened. But later steps, such as a sale, a dividend or a gift of shares, are taxed under the rules in force when they occur. If you're planning a further step, it's worth a check before you act.

Sometimes. HMRC may ask for more information on a clearance application before giving its decision, and can open an enquiry into a tax return in the usual way. A clear, complete clearance application and a well-documented step plan make questions less likely and easier to answer. Where we've advised on the restructure, we'll help you respond to anything HMRC raises about it.

No. Most of our clients are owner-managed businesses, often run by the people who founded them. The structures we work on suit companies from around £1m of value up to groups of £50m, and smaller companies that are generating real surplus cash. What matters more than size is whether there's a clear goal that a holding company or group would help achieve.

It's mostly about one-off decisions that are hard to reverse. Inserting a holding company, moving property within a group or selling a subsidiary each involves several taxes at once, an order of steps that matters and, often, a clearance from HMRC. Those decisions come up rarely in an ordinary accounts practice. Getting them right once tends to matter far more than any year-to-year saving.

No. We work on a single fee for the whole restructure, agreed in writing before work starts, so the cost doesn't depend on the time spent. Fees are exclusive of VAT and can be paid in full or over 2 monthly instalments. We confirm your exact fee within 1 working day of you telling us about your structure, and there are three packages, Essential, Premium and No Risk, all quoted on request.

A holding company is worth considering if your trading company has surplus cash you want to protect, owns property, or you plan to start a second business, sell part of the group or pass the business on. If none of those apply, it may add admin and cost you corporation tax without much benefit. The right answer depends on your profits, cash, shareholders and plans, so it is worth testing with your own figures first.

The main benefits are protection and flexibility. Profits can move from a trading subsidiary to the holding company as dividends that are normally exempt from corporation tax, putting cash out of reach of trading risk. Property and new ventures can sit in separate companies. A trading subsidiary sold by its holding company can be exempt from corporation tax on the gain, and holding company shares can qualify for inheritance tax Business Relief where the group trades.

There is no standard figure, and a holding company does not cut your tax on its own. Money taken out still pays dividend tax when it reaches you. The savings come from specific situations: deferring personal tax while cash is reinvested in the group, a tax-free sale of a subsidiary, keeping reliefs on a future sale or on death, or avoiding tax on moving property. Against that, the corporation tax limits can be halved. Only modelling your figures gives a real answer.

There is another company to run, with its own accounts, tax return and filings, and possibly group accounts. A holding company and its subsidiary are associated companies, which halves the corporation tax limits for each unless the holding company is passive. Setting one up takes careful planning, HMRC clearance and stamp duty paperwork. And cash built up in the group still pays dividend tax when you finally take it out personally.

Often not, for a company with modest profits and little surplus cash. The associated companies rules can push some profits from the 19% rate into marginal relief, and the extra admin is the same whatever your size. A holding company tends to pay its way where profits are being retained rather than all drawn out, where there is property or a second venture, or where a sale or succession is on the horizon.

It can, in two ways. If the holding company sells a trading subsidiary, the gain can be exempt from corporation tax under the substantial shareholding exemption, leaving the proceeds in the group. And a holding company makes it easier to separate cash, property or a side business that a buyer doesn't want before a sale. Whether selling the holding company or the subsidiary is better depends on what you plan to do with the proceeds.

It can help keep inheritance tax relief rather than create new relief. Shares in a holding company of a trading group can qualify for Business Relief, and from 6 April 2026 relief is 100% on the first £2.5m of qualifying business and agricultural property per person and 50% above. A holding company also makes it easier to separate investments and pass shares gradually, sometimes through a family investment company.

Not necessarily. You can still take a salary from the trading company and dividends, now usually from the holding company after it receives dividends from the trading company. The difference is choice: profits can stop in the holding company, protected and reinvested, rather than being paid to you and taxed at up to 39.35%. Dividend tax rates for 2026/27 are 10.75%, 35.75% and 39.35%, after a £500 allowance.

A holding company is the company at the top; the group is the holding company together with its subsidiaries. Tax law defines groups in different ways for different purposes. A 75% group can share losses through group relief and move assets without a capital gains charge, while a 51% link is enough for companies to be associated for corporation tax limits. Most owner-managed groups are 100% owned, so all the definitions apply.

Mainly to protect them and keep their options open. A dividend from a trading company to a holding company that controls it is normally exempt from corporation tax, so profits can move up without tax and sit away from the trade's creditors. From there, the cash can be invested, used to buy property or another business, or lent back to the trade. Personal tax arises only when the holding company pays dividends to the shareholders, at a time of their choosing.

Typically profitable owner-managed trading companies that retain more profit than the owners need to live on. Holding companies also suit businesses that own their premises, want to start or buy a second business, have several shareholders with different long-term plans, or expect a sale or a handover to the next generation. Businesses that pay out nearly all their profits each year, and have no property, second venture or exit plans, usually gain less from the extra company.

No. Holding company structures are a normal part of UK business, and the reliefs that support them, such as the dividend exemption, the substantial shareholding exemption and share-for-share relief, are deliberate parts of the tax system. What HMRC targets is arrangements with a main purpose of avoiding tax. Since 26 November 2025, share exchange relief is denied where that is the case, so the commercial reasons need to be real and clearly explained, usually in an HMRC clearance application.

You can form a new company online with Companies House quickly, but that is only the first step. Putting it above your existing company means a share-for-share exchange, ideally with HMRC clearance first, a stamp duty relief claim through adjudication and the right Companies House filings. Mistakes, such as issuing shares before clearance or changing shareholders' proportions, can cost reliefs or trigger stamp duty. Most owner-managers use a tax adviser for the restructuring and their accountant for the filings.

For the right business, yes, though the details have changed. From 26 November 2025 share exchanges face a main purpose test, so the commercial reasons need to be clear. Business Asset Disposal Relief rose to 18% from 6 April 2026, dividend rates are now 10.75%, 35.75% and 39.35%, and inheritance tax Business Relief is 100% only on the first £2.5m per person, with 50% above. That makes deferring personal tax and protecting reliefs more valuable, not less.

It can. A holding company lets you separate ownership from management: managers can run the trading company, and in time may be offered shares in it, while you keep control at holding company level and receive dividends. Cash and property built up in the group can provide an income that doesn't depend entirely on the trade. It also gives a framework for passing holding company shares to the next generation gradually, or for a later sale of the trading subsidiary.

A trading company runs a business: it sells goods or services, employs staff and earns trading profits. A holding company mainly owns shares in other companies, and its income usually comes from dividends paid by its subsidiaries. For many tax reliefs the two are looked at together: shares in the holding company of a trading group can qualify for Business Asset Disposal Relief and inheritance tax Business Relief, provided the group as a whole is mainly trading.

Often, yes. Buying through a holding company keeps the target separate from your existing business, so its risks and history stay in its own company. Once acquired, it can pay dividends to the holding company, normally free of corporation tax, which can help repay any acquisition borrowing. Stamp duty of 0.5% is payable on the price paid for the shares, and the new subsidiary becomes an associated company for the corporation tax limits. If you don't yet have a holding company, it may be worth inserting one first.

Limited liability already protects your personal assets in a single company, unless you have given personal guarantees. What a holding company adds is protection inside the business: cash, property and other ventures held in separate group companies are generally beyond the reach of one subsidiary's creditors. Personal guarantees, cross-guarantees and lender security can still reach them, so it is worth checking existing facilities before relying on the structure for protection.

Corporation tax on its own taxable profits, such as interest, rent, management charges and gains on investments. Dividends it receives from its trading subsidiaries are normally exempt, so a holding company whose only income is those dividends often has little or nothing to pay. For 2026/27 the rates are 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between, and those limits are shared across associated companies.

No. An umbrella company is an employment business that employs contractors and runs their payroll; it has nothing to do with owning other companies. A holding company is a company that owns shares in one or more subsidiaries, usually your own trading company, to protect cash, separate property, add ventures or plan a sale or succession. If you are a contractor working through your own limited company, a holding company is rarely worthwhile unless profits are being retained and reinvested.

Two companies are associated if one controls the other, or both are controlled by the same person or group of people, at any time in the accounting period. Control broadly means owning or being entitled to more than half of the shares, votes, income or assets, as defined in sections 450 and 451 of the Corporation Tax Act 2010. Associated companies share the corporation tax limits between them, so a group of companies can't each claim the full £50,000 small profits band.

Both limits are divided by the number of associated companies plus one. A company with one associated company has limits of £25,000 and £125,000; with two, £16,667 and £83,333; with three, £12,500 and £62,500. Each company applies its own reduced limits to its own profits. The division is equal, whatever each company earns, so a loss-making start-up still takes a full share of the limits away from its profitable sister company.

Usually, yes. A holding company controls its subsidiary, so they are associated, and both limits for each company are halved to £25,000 and £125,000. The exception is a passive holding company under section 18F of the Corporation Tax Act 2010, which is treated as not carrying on a business and so is ignored. That only works where the holding company owns nothing but its subsidiaries' shares and simply passes dividends straight through to its shareholders.

It's a holding company that does nothing except own shares in its 51% subsidiaries and pass their dividends on. Throughout the accounting period it must carry on no trade, own no assets other than shares in its 51% subsidiaries, have no income other than exempt dividends, pay out at least as much in dividends as it receives in the period, make no chargeable gains, have no management expenses and make no charitable donations. If all of that is true, it doesn't count as an associated company.

Only dividend money waiting to be paid on. A passive holding company must have no assets other than shares in its 51% subsidiaries, but the law ignores a dividend it has received, and any asset representing it, where that dividend is passed on to its shareholders in the same period. So a bank account that simply receives a subsidiary's dividend and pays it out to shareholders is fine. Keeping surplus cash, a deposit or a loan to a subsidiary means it is no longer passive.

It can. One of the section 18F conditions is that no expenses of managing the holding company's investment business are referable to the period. Accountancy, filing and professional fees incurred by the holding company itself are likely to be management expenses, so paying them can make it an associated company for the whole year. Many groups arrange for the costs to be met elsewhere, but the arrangement needs to be genuine, and it's worth checking with your adviser before the year end.

Yes, at least the same amount. The redistribution condition in section 18F requires the holding company to pay dividends to its own shareholders in the accounting period totalling at least the dividends it received in that period. If a subsidiary pays £100,000 up to the holding company and only £60,000 goes on to the shareholders before the year end, the condition fails, and the holding company counts as an associated company for that year. Timing of dividends near the year end needs care.

No, provided it carried on no trade or business at any time in the accounting period, or in the part of the period when it was associated. A truly dormant company with no activity is ignored. A company that holds investments, lets a property or earns interest is likely to be carrying on a business, even if it seems inactive, and so counts. A non-passive holding company is usually treated as carrying on a business of holding investments.

Yes. A company is associated for an accounting period if it was associated for any part of it, so a company acquired, or set up and trading, two months before the year end reduces the limits for the whole 12 months. The same applies to a company that leaves the group part way through. The only exception is a company that carried on no trade or business at all during the part of the period when it was associated.

Not automatically. Since April 2023, the shares of relatives and business partners are only counted as yours for this purpose if there is substantial commercial interdependence between the companies, looking at financial, economic and organisational links. A spouse's unrelated business, run separately, is normally not associated with yours. If the companies share customers, staff, premises or funding, they may be. Shares you hold yourself always count, wherever the other shareholders are.

Yes. A company can be an associated company wherever it is resident, so an overseas subsidiary, or an overseas company owned by the same shareholders, reduces the UK company's limits just like a UK company would, provided it carries on a trade or business. It's easy to overlook when the overseas company files no UK returns, so groups with international interests should list every company under common control, not just the UK ones, when working out their corporation tax.

At most £1,875 a year for each company affected. For a company with profits between £50,000 and £125,000, halving the limits always costs exactly £1,875, because marginal relief falls by 3/200 of the £125,000 reduction in the upper limit. The cost tapers to nothing at profits of £25,000 and at £250,000. A company with profits above £250,000 pays 25% either way, so it isn't affected at all, which is why the rule mainly matters for smaller groups.

Each extra pound of profit between the limits is taxed at an effective 26.5%. That's the 25% main rate plus 1.5% from the marginal relief withdrawn as profits rise, because the relief is 3/200 of the gap between profits and the upper limit. On profits of £100,000, for example, a company with no associated companies pays £22,750, an average of 22.75%. Associated companies lower the band, so that 26.5% slice starts and ends at lower profits.

No. The holding company's rate is based on its augmented profits, which are its taxable profits plus certain exempt dividends, but dividends from its own 51% subsidiaries, or from a company in the same 51% group, are left out. So a holding company receiving £500,000 of dividends from its trading subsidiary still has its small taxable profits taxed at 19% if they are within its limits. Dividends from a minority stake, though, are added to augmented profits.

Not on that holding alone, because 40% isn't control. It becomes associated if you control it some other way, for example through a casting vote, rights to acquire more shares, or by adding shares held by a company you control. It is also associated if the same group of people who control your company together control it too. Where a relative or business partner holds the rest, their shares count only if there is substantial commercial interdependence between the companies.

Yes. For accounting periods beginning on or after 1 April 2023, the £1.5 million profits threshold for paying corporation tax in quarterly instalments is divided by the number of associated companies plus one. A group of a holding company and two subsidiaries could therefore find a company paying instalments once its profits pass £500,000. There is a first-year exception: a company that wasn't large in the previous 12 months needn't pay by instalments, unless its profits exceed £10 million, a figure that is divided in the same way.

Both limits are reduced in proportion to the length of the period, and then divided between associated companies. A six-month accounting period, with one associated company, has limits of £12,500 and £62,500. This often arises when a new subsidiary is formed or a year end is changed to line up with the rest of the group. The associated company count still applies to the short period, based on whoever was associated at any time during it.

Rarely, and it shouldn't be the reason. If you still control both companies, nothing changes. Shares held by relatives are ignored only where there's no substantial commercial interdependence between the companies, and a real gift of control has wider consequences, including capital gains tax on the gift, inheritance tax and loss of control. With the cost of an associated company capped at £1,875 a year per company, restructuring ownership to save it rarely makes sense.

No. A passive holding company can't own any assets other than shares in its 51% subsidiaries, or have any income other than dividends, so property let to the trading company fails two conditions at once. The holding company then counts as an associated company and both companies' limits are halved. For many groups that's a price worth paying for keeping property away from the trading company, but it should be part of the decision about where the property sits.

Only if the holding company has no other job to do. The saving is at most £1,875 a year for each subsidiary with profits between £25,000 and £250,000, and nothing where profits are above £250,000. A holding company kept passive can't hold surplus cash, own property, lend to the group or charge for services, which are often the reasons for having one. For a group protecting significant cash, the associated company cost is usually small by comparison.

Yes, if the conditions are met throughout the two years before the sale. The holding company must be the holding company of a trading group, it must be your personal company, which broadly means you hold at least 5% of the shares and votes plus a 5% economic interest, and you must be an officer or employee of the holding company or another group company. BADR is not lost just because there is a holding company above the trade.

For disposals from 6 April 2026, Business Asset Disposal Relief taxes qualifying gains at 18%. The rate was 10% before 6 April 2025 and 14% for 2025/26. Gains above the £1m lifetime limit, or that do not qualify, are taxed at the normal capital gains tax rates of 18% within the basic rate band and 24% above it. The annual exempt amount is £3,000.

At most £60,000 per person in 2026/27. BADR taxes up to £1m of lifetime gains at 18% instead of the 24% higher rate, a difference of 6% on £1m. That is less than it used to be, but still worth protecting, and a couple who each qualify can save up to £120,000 between them. Where a seller's gains would fall in the basic rate band anyway, the saving is smaller.

A holding company is a company with one or more 51% subsidiaries. The group is a trading group if the activities of the holding company and its 51% subsidiaries, taken together as one business, do not include non-trading activities to a substantial extent. Activities between group companies are disregarded. So the test looks at the whole group, not at the holding company on its own, which itself usually does little more than hold shares.

Not necessarily. If the property subsidiary only lets premises to the group's own trading companies, that letting is an intra-group activity and is disregarded in the trading group test. Property let to outside tenants is an investment activity and counts as non-trading. If it is substantial, broadly more than 20% on HMRC's indicators such as income, assets and time spent, BADR on the holding company shares can be lost for the whole gain.

There is no fixed figure. HMRC treats more than 20% as substantial and weighs indicators such as non-trading income, the asset base, expenses and staff time, and history. Cash that the trade needs, or that is earmarked for a genuine trade purpose, normally counts as trading. HMRC's guidance says long-term retention of significant trading profits may amount to an investment activity, so years of surplus cash need reviewing well before a sale.

No, not on its own. For a holding company, BADR looks at the activities of the whole group taken together, so cash moved from a trading subsidiary up to the holding company is still inside the group and still counts in the test. Moving the cash up can protect it from the trading company's creditors and help with the substantial shareholding exemption, but for BADR the question is what the group as a whole is doing.

Generally yes. After a share-for-share exchange, your holding company shares are treated as the same asset as your original trading company shares. HMRC's guidance at CG63975 looks through the exchange, so the time you held the trading company counts towards the two years. But from the date of the exchange, the conditions must be met in relation to the holding company, including the 5% tests and being an officer or employee.

Not necessarily a director, but you must be an officer or employee. For a holding company, being an officer or employee of the holding company itself or of a company in its trading group is enough. So a shareholder employed by the trading subsidiary can qualify on a sale of the holding company shares. A shareholder who has no role anywhere in the group for the two years before the sale cannot.

You must hold at least 5% of the holding company's ordinary share capital and at least 5% of the voting rights. You must also have either at least 5% of the profits available for distribution and of the assets on a winding up, or at least 5% of the proceeds if the whole ordinary share capital were sold. All of this is tested on the holding company after the exchange, throughout the two years.

Not on their own. The personal company test needs at least 5% of the voting rights as well as 5% of the ordinary share capital, so a family member who holds only non-voting shares will usually fail it, however valuable the shares. When a holding company is inserted, it is a good moment to check that each shareholder who expects BADR will hold voting shares and meet all the 5% tests.

It is an election that switches off the normal no-disposal treatment on a share-for-share exchange. Instead, you are treated as selling your original shares at the time of the exchange, and you can claim Business Asset Disposal Relief on that gain then. The election covers all the shares in the exchange. It is useful where the new holding company shares may not qualify for BADR later, but it means paying tax without receiving cash.

Mainly when you expect to lose BADR after the exchange. Examples include a holding company that will build up large investments, which could fail the trading group test, or where your stake in the holding company will fall below 5% or you will step away from any role. The election locks in BADR at the time of the exchange. The deadline is the first anniversary of 31 January after the tax year of the exchange.

By the first anniversary of 31 January following the end of the tax year of the sale. For a sale in 2026/27, that is 31 January 2029. The claim is usually made in your self assessment return. Because BADR depends on facts throughout the previous two years, it helps to have the evidence ready before the sale, including shareholdings, roles and the group's trading status.

BADR can still be available if you dispose of the shares within three years of the company ceasing to be the holding company of a trading group, and the conditions were met throughout the two years up to that point. This matters where the holding company sells its last trading subsidiary and is then wound up. If more than three years pass, or the conditions failed earlier, the relief is lost.

Yes, but only in their own right. Each spouse or civil partner must meet the conditions personally for the two years before the sale: hold at least 5% of the shares, votes and economic interest, and be an officer or employee of the holding company or a group company. If they qualify, each has their own £1m lifetime limit, which can double the relief available to a couple.

It can. Shares, funds, let property or large cash deposits held by the holding company or any company in the group are non-trading activities. If they are substantial in the context of the whole group, measured against HMRC's 20% indicator using income, assets, costs and time, the holding company stops being the holding company of a trading group and BADR is lost on the whole gain, not just part of it.

Start at least two years ahead if you can. Check that every seller holds 5% of the shares, votes and economic rights, and has a role in the group. Review cash and investments against the trading group test. Consider moving let property or investments out of the group, with the tax cost of doing so checked first. Keep board minutes explaining what cash is for. Close or tidy dormant or non-trading companies.

The £1m is a lifetime limit, so gains on earlier qualifying disposals, including those made under the old Entrepreneurs' Relief name, count towards it. If you have already claimed relief on, say, £600,000 of gains, only £400,000 remains for a later sale. The rest is taxed at normal capital gains tax rates. It is worth checking past claims before modelling the tax on a holding company sale.

Demerging a group means splitting it so that businesses or assets which sat under one holding company end up in separate ownership chains. Often the same shareholders own two holding companies side by side, one with the trade and one with property or investments. In other cases different shareholders each take a different business. Done properly, with HMRC clearance, a demerger can usually be carried out without immediate tax for the shareholders or the companies.

A sale turns part of the group into cash for someone else. A demerger keeps everything in the family or the existing shareholder group, but in separate structures. It suits shareholders who want to go their own way, owners who want to keep the property while preparing the trade for sale, and families planning succession. It is a reorganisation of ownership, not a disposal to a third party, which is why tax reliefs are available.

Yes. Where two shareholders or families want to run different businesses within the group, a partition demerger can give each of them one business outright, with no cross-shareholdings left behind. The shares are usually reorganised into separate classes first, so each class can receive shares in its own new company. Valuations matter, because each side needs to receive a fair share of the value, and HMRC will expect the commercial reasons to be explained in the clearance application.

Yes, this is one of the most common reasons to demerge. The property company is moved out from under the trading holding company, so the same shareholders own it directly or through a second holding company. A statutory demerger usually won't work for property, because those rules are designed for trading activities, so a capital reduction demerger or a liquidation demerger is normally used. SDLT on any earlier intra-group property transfers needs checking first.

It depends on what is being separated and why. A statutory demerger suits splitting trading businesses where no sale or change of control is planned. A capital reduction demerger is often used to separate property or investments, or where a sale of one side may follow. A liquidation demerger under section 110 of the Insolvency Act 1986 is used where the other routes don't suit. Each has conditions, anti-avoidance rules and company law steps.

A statutory demerger uses rules in the Corporation Tax Act 2010 so that a company can distribute shares in a trading subsidiary, or transfer a trade to a new company, without the shareholders being taxed on an income distribution. The conditions are strict: the companies must be trading, the distribution must benefit the trading activities, and there must be no plan for a sale, a cessation or a change of control afterwards. Payments within five years can also be taxed.

The company reduces its share capital using a special resolution supported by the directors' solvency statement, and uses the reduction to transfer a business or subsidiary to a new company, which issues shares to the shareholders. For shareholders, the reconstruction rules normally mean there is no disposal for capital gains tax. For the company, the transfer can be at no gain and no loss. Since 26 November 2025 both reliefs are subject to a main purpose test.

A section 110 demerger puts the company into a members' voluntary liquidation. The liquidator transfers its businesses or assets to new companies, which issue shares directly to the shareholders. It is often used where a capital reduction isn't practical, or where several businesses are being divided between different shareholders. The directors must make a statutory declaration of solvency, and the costs and timetable of a liquidation are usually greater than other routes.

A new holding company is often inserted at the top first, through a share-for-share exchange. This puts the share capital and reserves needed for the split in the right company, lets the group be divided cleanly at the top, and avoids disturbing the trading company itself. The share exchange has its own clearance and stamp duty points, and the order of the steps, and how they are described to HMRC, needs care under the new main purpose test.

It depends on the route. A statutory demerger normally needs clearance under section 1091 CTA 2010. Reconstructions rely on section 138 TCGA 1992 for the shareholders and section 139 for transfers of a business between companies. Section 701 ITA 2007 deals with transactions in securities for income tax. These can all go in one application to HMRC's Clearance and Counteraction Team, which responds within 30 days of a complete application.

A straightforward demerger often takes a few months. The planning and valuations come first, then the clearance application, which HMRC aim to answer within 30 days, or within 30 days of answering any further questions. After that come the legal steps, the stamp duty adjudication and the filings. Where property, lenders, landlords or third-party consents are involved, the timetable is usually set by those rather than by HMRC.

Sometimes. Share exchanges and transfers of shares to new companies can qualify for stamp duty reliefs under sections 75 and 77 of the Finance Act 1986, which still require bona fide commercial reasons and need HMRC adjudication. Where a demerger splits shareholders so that holdings no longer mirror each other, section 75 relief may not be available. A dividend declared directly in shares normally carries no stamp duty because there is no consideration.

It can. If property was moved between group companies using SDLT group relief in the last three years, and the company holding it leaves the group in the demerger, the relief is normally clawed back on the property's market value. New transfers of land can also be charged, with reconstruction or acquisition relief available in some cases. In Scotland and Wales the equivalent reliefs sit in LBTT and LTT. The property history should be mapped before choosing a route.

A degrouping charge arises when a company leaves a capital gains group within six years of receiving an asset from another group company at no gain and no loss. It treats the asset as sold and reacquired at market value at the time of the earlier transfer. It does not apply where a company leaves a group only because of a statutory demerger distribution, but other routes need checking, especially where property has moved within the group.

Not usually, where the conditions are met. The reorganisation and reconstruction rules treat the shareholders' new shares as standing in the shoes of their old ones, so there is no disposal on the demerger itself. Their base cost is split between the companies, for unquoted shares by reference to market values when they later sell. A gain is taxed only when the shares are eventually sold, which is why the structure afterwards matters.

Possibly, but timing and route are critical. A statutory demerger isn't available where there are arrangements for a sale or change of control afterwards. A capital reduction or liquidation demerger can be used where a later sale is planned, but every step must be explained to HMRC. HMRC's guidance says a restructure so a later sale qualifies for a relief is not caught where the conditions are then met throughout the relevant period.

It can help or hinder. The two-year ownership period normally carries over where new shares are treated as the same as the old ones, so the shareholders don't start again. But each company must now qualify on its own: a trading company's shares can qualify, while a company mainly holding property or investments usually won't. Separating the two can make the trading shares' position cleaner, and it is worth modelling before the split.

Our sister site Demerger Tax, at demergertax.co.uk, covers every demerger route in depth, including partition demergers, capital reduction demergers, liquidation demergers, statutory demergers and the tax on each. It is run by the same team, so the advice is joined up whether your demerger starts with a holding company question or a wider restructure. We can look at your group and tell you which route is likely to fit.

Normally not. A dividend paid by a UK company to a holding company that controls it is exempt from corporation tax under Part 9A of the Corporation Tax Act 2009. Small holding companies are covered by a separate exemption that applies to most dividends from UK companies. So profits can move up the group without a tax charge, leaving tax to be paid only when the holding company pays a dividend out to you.

The first £500 of dividends is covered by the dividend allowance. Above that, dividends are taxed at 10.75% within the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band. Dividends sit on top of your other income, so salary and other income use up the lower bands first. The holding company pays dividends from profits that have already borne corporation tax in the trading company.

Not on the dividends you actually take. A dividend from your holding company is taxed on you at exactly the same rates as one from your trading company. The advantage is that you can move profits you don't need up to the holding company tax-free, protect them from the trade and reinvest them, without paying yourself a taxed dividend first. The tax saving comes from not extracting cash you don't need personally.

Only if it has distributable profits of its own. A newly inserted holding company usually starts with no realised profits, so it can't pay a lawful dividend until it has received dividends from its trading subsidiary or made profits of its own. The usual order is for the trading company to pay a dividend up first, then for the holding company to pay its shareholders, with board minutes and accounts supporting each step.

Usually from the company you actually work for and that benefits from your work, which is normally the trading company. A salary is deductible only where it is paid wholly and exclusively for that company's business and is reasonable for the work done. Some groups employ directors in the holding company and recharge the cost through a management charge, which can be sensible where you work across several subsidiaries, but it needs documenting.

It depends on your tax band. On our numbers, for £10,000 of company profit taxed at 25%, a basic rate taxpayer keeps £6,693.75 as a dividend but only £6,260.87 as salary, once employer and employee National Insurance and income tax are paid. For a higher rate taxpayer the result reverses narrowly: £4,818.75 as dividend against £5,043.48 as salary. Many directors take a modest salary and the rest as dividends.

Not usually for tax alone. A dividend up is normally exempt, while a management charge is taxable income in the holding company and deductible for the subsidiary, so at the same tax rate it broadly cancels out. A charge makes sense where the holding company genuinely employs the directors or provides finance, HR or IT services and needs income to cover those costs. It needs a written agreement, a reasonable basis and a VAT check.

It can, but it is usually simplest for the company that employs you to pay. Employer contributions are generally deductible where they are paid wholly and exclusively for the business, and HMRC looks at whether your whole remuneration package is reasonable for the work you do. If the holding company employs you and charges your services to the subsidiaries, it may make the contribution. Contributions count towards your annual allowance, normally £60,000.

If you borrow from a close company, whether the trading company or the holding company, and the loan is still outstanding nine months after the end of the company's accounting period, the company pays a temporary tax charge under section 455. For loans made on or after 6 April 2026 the rate is 35.75%. The tax is repaid once the loan is repaid, but not until nine months after the end of the period in which you repay it.

No. Both companies are normally close companies, and you are a participator in both, so a loan to you from either can trigger the 35.75% section 455 charge if it isn't repaid within nine months after the year end. A large interest-free loan can also give you a taxable benefit. Anti-avoidance rules stop you clearing a loan just before the deadline and borrowing again straight afterwards.

Distributable reserves are a company's accumulated realised profits, less its accumulated realised losses. Every company in a group must have enough of its own before paying a dividend, judged by its last accounts or interim accounts. The holding company's reserves come mainly from dividends its subsidiaries pay up. A dividend paid without enough reserves is unlawful, and a shareholder who knew or should have known can be made to repay it.

Yes. A company can buy back its own shares, usually funded from distributable profits, so a holding company can buy out a departing shareholder. If conditions in section 1033 of the Corporation Tax Act 2010 are met, the payment is taxed as a capital gain rather than as a dividend. The conditions include the holding company heading a trading group, the buyback being mainly for the benefit of the trade and the seller having owned the shares for five years.

Yes. Section 1044 of the Corporation Tax Act 2010 lets the company apply to HMRC before the payment is made, asking them to confirm that the capital treatment in section 1033 will apply. The application sets out the reasons for the buyback and how each condition is met. Unlike some other clearances there is no statutory deadline for HMRC to reply, so it is worth applying well before the planned completion date.

It can be, because distributions in a formal winding up are usually taxed as capital gains, at 18% or 24%, or 18% with Business Asset Disposal Relief where the conditions are met, rather than as dividends at up to 39.35%. But an anti-avoidance rule taxes the distribution as a dividend where a 5% shareholder carries on a similar activity within two years and avoiding income tax is a main purpose of the winding up.

Often, yes. The dividend allowance and your basic and higher rate bands are used year by year and can't be carried forward. Spreading dividends across tax years, for example paying some before 5 April and some after, can keep more income in lower bands. It can also keep your income below £100,000, where the personal allowance starts to be withdrawn. The holding company must have the reserves at the time each dividend is paid.

Only if the share rights allow it. Shareholders in the same class of shares must normally receive the same dividend per share. Different classes, sometimes called alphabet shares, can let the holding company pay different dividends to different family members. HMRC can challenge arrangements that simply divert income to a spouse or child under the settlements rules, so share classes need careful design and real rights.

Normally not. Exempt dividends received from its subsidiaries are not taxable, and dividends it pays out are not deductible, so a holding company that only receives and passes on dividends usually has little or no taxable profit. If it has other income, such as interest on cash, management charges or rent, that income is taxed. A holding company with only shares and dividends can also be a passive holding company for the associated companies rules.

It depends on the sale. Cash left in the group is part of what the buyer pays for, so it may come out as capital on the sale, but buyers don't always pay full value for surplus cash, and a large cash pile can put Business Asset Disposal Relief at risk. Paying dividends before a sale gives certainty but is taxed at dividend rates. The answer depends on the price mechanism, your bands and the reliefs at stake.

A family investment company, or FIC, is a private company owned by family members that holds investments rather than running a trade. Alongside a trading group, it is usually used to hold cash the business doesn't need, so that it can be invested for the long term and future growth can belong to the next generation. It can sit above the group's holding company, or alongside it as a separate company owned by the family.

Only if the family investment company is a shareholder in the group. Dividends from a UK company to a company shareholder are normally exempt from corporation tax, so a FIC that owns the holding company can receive dividends without tax. If the FIC is a separate company owned by the family alongside the group, cash usually has to pass through the shareholders first as personal dividends, taxed at up to 39.35%, before being put into the FIC.

The advantage is that cash can move up from the trading group to the FIC as tax-free dividends and be invested away from the trade, with ownership of the growth shared with the family. The drawback is that the FIC's investments then sit at the top of the group, where they count in the trading tests for Business Asset Disposal Relief and can restrict inheritance tax Business Relief on the parents' shares.

Usually by a share-for-share exchange: the family investment company issues shares to the existing shareholders in exchange for their holding company shares. That can defer capital gains tax and attract stamp duty relief, but since 26 November 2025 the relief is subject to a main purpose test, and HMRC clearance is normally obtained first. The reasons for the new structure need to be genuine, documented and consistent with what then happens.

Yes, in principle. The substantial shareholding exemption looks at the company being sold and whether it is trading, not at whether the selling company trades, because that condition was removed in 2017. So the holding company can still sell a trading subsidiary free of corporation tax if the 10% and 12-month conditions are met. If the FIC itself sells the holding company, the same tests apply to the holding company's group.

Growth shares are a class of shares that only take value above a set hurdle, often the company's value when they are issued. Parents keep shares carrying the existing value and, often, the votes, while children take the growth shares at a low starting value. Future growth then builds up in the children's hands rather than the parents' estates. The share rights and the valuation at issue need careful drafting.

Alphabet shares are separate classes, such as A, B and C shares, that allow dividends to be paid on one class without the others. In a family investment company they let parents direct income to particular family members. They must be used carefully: the settlements rules can tax income on the parent who set up the arrangement, especially for minor children and for shares given to a spouse that carry little more than a right to income.

You can, but income on shares given by a parent to their own unmarried minor child is normally taxed as the parent's income if it is more than £100 a year. That is the settlements rule for minor children. Many families give shares that don't pay dividends while children are under 18, use shares that only take capital growth, or give through grandparents or a trust instead. The aim of the gift should be long-term ownership, not income splitting.

The settlements rules are income tax anti-avoidance rules. A settlement is defined very widely and includes any disposition, arrangement or transfer of assets. Where the person who made it keeps an interest, or the income goes to their minor child, the income can be taxed as theirs. The exemption for outright gifts between spouses doesn't apply where the gifted property is wholly or substantially a right to income. A FIC's share structure has to be designed around these rules.

No. Business Relief doesn't apply to shares in a company whose business is wholly or mainly making or holding investments, which is what a family investment company does. Its value is protected in a different way: by passing shares, or future growth, to the next generation early, so that the value builds up outside the parents' estates. Gifts of FIC shares to individuals are potentially exempt transfers, free of inheritance tax after seven years.

It can. If your shares are in a FIC that owns the trading group, relief depends on whether the FIC's business is wholly or mainly holding the trading group. As investments build up at the top, more value can be treated as excepted assets, and if investments become the main activity, relief on the whole shareholding can be lost. With 100% relief now capped at £2.5m per person, that balance needs watching.

A FIC pays corporation tax on interest, rent and capital gains. A FIC that mainly holds portfolio investments is usually a close investment-holding company, so it pays 25% on all its taxable profits; one that mainly holds a trading group or commercially let property can use the 19% rate and marginal relief. Dividends it receives from UK companies are normally exempt. That makes a company a natural home for share portfolios. Indexation on company gains was frozen in 2017, so gains on long-held investments are taxed in full. Tax is paid again when profits are paid out to family members as dividends.

A stand-alone FIC that mainly holds portfolio investments usually is. A close investment-holding company can't use the 19% small profits rate or marginal relief, so it pays 25% on all its taxable profits. A FIC that mainly holds shares in trading companies it controls, or commercially let property, is treated differently, because those are permitted purposes. Where the FIC sits above a trading group, its main purpose may well still be holding the group.

Usually, yes. Companies under common control are associated, and each company's 19% and 25% corporation tax thresholds are divided by the number of associated companies plus one. A FIC that holds investments carries on a business, so it counts. The narrow exception for passive holding companies only applies where the company has nothing but shares in its subsidiaries and pays out all the dividends it receives, which a FIC doesn't do.

The main routes are dividends, taxed on each family member at 10.75%, 35.75% or 39.35% after the £500 allowance, and repayment of any money the parents lent to the company, which is tax-free. Loans from the FIC to family shareholders can trigger a 35.75% corporation tax charge until repaid. Because family members pay tax at their own rates, dividends to adult children with lower incomes can be efficient, within the settlements rules.

Many parents fund a FIC with a loan rather than a gift. A loan can be repaid to them tax-free as the FIC earns income, while the children's shares take the growth on the investments. Money lent stays in the parents' estate for inheritance tax until repaid or written off. Subscribing for shares or making gifts takes value out of the estate faster but gives up access. The mix depends on what the parents need.

Yes, that is one of the main attractions. Parents can hold the voting shares and be the directors, while children hold non-voting or growth shares carrying most of the value. The articles and a shareholders' agreement can restrict transfers outside the family. But if the parents keep a benefit from shares they have given away, the gift can be treated as reserved for inheritance tax, so the design matters.

A trust can suit where the beneficiaries are young or not yet born, or where the family wants flexibility over who benefits later. Trusts pay inheritance tax charges on entry above the nil-rate band and every ten years, but Business Relief can reduce those charges for qualifying trading shares. A FIC suits long-term investment of cash with parental control and corporation tax rates. Some families use both, for example a trust holding FIC shares.

At least 75%. Group relief for losses needs one company to be a 75% subsidiary of the other, or both to be 75% subsidiaries of a third company, such as your holding company. The parent must own at least 75% of the ordinary share capital, directly or indirectly, and be entitled to at least 75% of the profits available for distribution and of the assets on a winding up. Ownership through a chain of companies is multiplied through, so 80% of 80% is only 64%.

Trading losses, excess capital allowances and non-trading deficits on loan relationships can be surrendered in full for the same period. UK property business losses, management expenses, non-trading losses on intangible fixed assets and qualifying charitable donations can be surrendered only to the extent they exceed the surrendering company's own profits. Capital losses can't be surrendered as group relief at all, although a separate election can move a gain or loss between capital gains group companies.

Not through group relief, but a section 171A election can achieve much the same result. Two companies in the same capital gains group can jointly elect to treat a gain or loss, or part of it, as accruing to the other company. So a gain on one company's sale of a property can be matched with capital losses sitting in another group company. The election must be made within two years after the end of the accounting period of the company in which the gain or loss arose.

Yes, for losses arising on or after 1 April 2017, through group relief for carried-forward losses. The surrendering company must consent, and the claimant normally has to use its own carried-forward losses first. Losses made before April 2017 can't be surrendered in this way. The general restriction on carried-forward losses also applies: above a deductions allowance of £5 million per group, only 50% of remaining profits can be covered by brought-forward losses.

Relief is limited to the overlapping period, when both companies were in the group. Profits and losses for each company's accounting period are apportioned by time to that overlap, and any relief already given for the same overlap is deducted. So a subsidiary acquired halfway through the claimant's year can usually surrender only the losses for the months after it joined, against the claimant's profits for the same months.

It can. Section 154 of the Corporation Tax Act 2010 treats two companies as not in the same group once arrangements are in place under which one of them could leave the group, or under which someone could take control of one but not the other. Arrangements don't have to be a signed or legally binding contract, so the point at which a sale counts as arranged needs care. From then on, losses may not be surrenderable between the company being sold and the rest of the group.

It's a principal company, usually the holding company, together with its 75% subsidiaries and their 75% subsidiaries, under section 170 of the Taxation of Chargeable Gains Act 1992. Every member must also be an effective 51% subsidiary of the principal company, entitled through the chain to more than half of its distributable profits and of its assets on a winding up. A company can be in only one capital gains group. Members can move assets between them without a corporation tax charge.

Yes, within a capital gains group. A transfer between group members is treated as made for a price that gives no gain and no loss, so the receiving company takes over the original cost and the gain is deferred until the asset leaves the group. SDLT is a separate tax with its own group relief, which also needs a 75% group and must be claimed on the SDLT return. Both reliefs can be lost if the receiving company leaves the group within a set period.

It's a catch-up charge on assets moved between group companies tax-free. If a company receives an asset from another group company under the no-gain, no-loss rule, and then leaves the group within six years while still owning it, it is treated as having sold and bought back the asset at its market value at the time it originally received it. The gain that was deferred on the intra-group transfer then becomes chargeable, which stops a company moving assets into a subsidiary just before selling it.

Not on assets moved between those two companies, provided they leave at the same time and are still grouped with each other. If a holding company sells a sub-group, and an asset passed between two companies within that sub-group, no degrouping charge arises because the asset stays within the companies that remain grouped together. Assets received from a company that stays behind are different: a degrouping charge can still arise on those, unless another exemption applies.

Where a subsidiary leaves because a group company sells its shares, the degrouping gain is added to the sale proceeds of those shares, so it falls on the seller and the substantial shareholding exemption can cover it. Where a subsidiary leaves another way, for example because it issues new shares to an outside investor that take the group below 75%, there's no share sale to attach the gain to. The charge then normally falls on the subsidiary itself, and SSE doesn't help.

There is a separate degrouping charge for intangible fixed assets, such as goodwill and intellectual property, under the corporate intangibles rules. Since Finance Act 2019, it doesn't apply where the company leaves the group on a sale of its shares that qualifies for the substantial shareholding exemption, unless there are arrangements for the shares to be sold on. That brought intangibles broadly into line with the capital gains rule, where the degrouping gain is added to the share sale proceeds.

SDLT group relief exempts a transfer of land or buildings between companies in a 75% group, where the parent has at least 75% of the shares, distributable profits and assets on a winding up, directly or indirectly. It isn't available where there are arrangements for the buyer to leave the group, for consideration to come from outside the group, or where tax avoidance is a main purpose. Relief must be claimed on an SDLT return, even though no tax is payable.

The relief is withdrawn if the company that received the property leaves the group within three years of the transfer, or later under arrangements made within those three years, while it still owns the property or a relevant interest in it. SDLT is then charged on the property's market value at the time of the original transfer, and the company must file a further return within 30 days. Some exits are excepted, such as the transferring company leaving through being wound up, but each case needs checking.

No. The substantial shareholding exemption only removes corporation tax on a gain from selling shares, including any capital gains degrouping charge added to the sale proceeds. SDLT clawback is a separate charge under the SDLT rules, falling on the company that received the property, and has no link to SSE. If a property company or trading subsidiary that received land under group relief is likely to be sold within three years, the SDLT cost should be part of the price negotiation.

Not if the group is small. A parent company subject to the small companies regime is exempt from preparing group accounts, though it can choose to. For financial years beginning on or after 6 April 2025, a group is small if it meets two of three tests: aggregate turnover of no more than £15 million net, an aggregate balance sheet of no more than £7.5 million net, and no more than 50 employees. Larger groups normally have to prepare group accounts.

The size thresholds went up for financial years beginning on or after 6 April 2025. A small group can now have aggregate turnover of up to £15 million and a balance sheet of up to £7.5 million (previously £10.2 million and £5.1 million), with no more than 50 employees, meeting two of the three. Medium group limits rose to £54 million turnover and £27 million balance sheet, with up to 250 employees. Some groups that previously prepared group accounts may no longer need to.

Often it helps. UK companies under common control can form a VAT group with one registration, and supplies between members, such as management charges or rent from a property subsidiary, are then ignored for VAT. The trade-off is that every member is jointly and severally liable for the whole group's VAT, which can undermine the ring-fencing of a risky new venture. Each company must be established or have a fixed establishment in the UK. Whether a VAT group suits your companies is worth a specific review alongside the corporation tax planning.

Yes. For rollover relief, the trades of all members of a capital gains group are treated as a single trade. So if one subsidiary sells qualifying business premises at a gain and another group company buys replacement premises for its trade within the time limits, the gain can be rolled over into the new asset. That gives the group flexibility to sell in one company and reinvest in another. Assets let outside the group and investment property generally don't qualify.

No. A capital gains group needs 75% ownership at each level, plus effective ownership of more than half of the profits and assets through the chain. A 60% subsidiary is outside the group, so assets moved to or from it are treated as sold at market value, and it can't receive or surrender group relief. It is still an associated company for corporation tax limits, and the holding company can still qualify for the substantial shareholding exemption if it sells its 60% stake.

No. Clearance is optional. But without it, you carry the risk that HMRC later argues the anti-avoidance rule in section 137 TCGA 1992, or the transactions in securities rules in ITA 2007, applies to your share exchange. That could mean a capital gains tax or income tax charge years later. Clearance gives written confirmation in advance, so most advisers treat it as standard for a holding company insertion.

Capital gains tax and corporation tax, through one specific rule. It confirms that HMRC is satisfied the share exchange will be effected without arrangements to which section 137 TCGA 1992 applies. Since 26 November 2025, section 137 is a main purpose test: it applies where the arrangements have a main purpose of reducing or avoiding capital gains tax or corporation tax. A section 138 clearance only covers that rule. It has to be obtained before the holding company shares are issued.

Because the two cover different taxes. Section 138 deals only with capital gains tax and corporation tax under section 137. Section 701 ITA 2007 deals with the transactions in securities rules, which can tax a receipt as income where a main purpose is to obtain an income tax advantage. Inserting a holding company is a transaction in securities, and it isn't a fundamental change of ownership, so both clearances are usually sought together.

Yes. HMRC accepts a single application covering several statutory clearances, as long as it lists each provision applied for. Applications go to HMRC's Clearance and Counteraction Team, normally by email to reconstructions@hmrc.gov.uk. One combined application keeps the facts consistent and lets HMRC see the whole transaction at once, which is generally what it prefers.

A section 138 application is made by the acquiring company, the new holding company, or by the trading company whose shares are being acquired. A section 701 application is made by the person who will be party to the transaction, typically on behalf of the shareholders. In practice one combined application is submitted by the adviser, setting out who each clearance is sought for.

HMRC should reply within 30 days of receiving the application. If it needs more information, it must ask within those 30 days, and it then has 30 days from receiving the answers to give its decision. Most well-prepared applications are decided within the first 30 days. We plan the timetable around the possibility of one round of questions, so a year end or refinancing isn't put at risk.

In outline: the companies involved with their tax references and trading status, the shareholders and how they are connected, shareholdings before and after, each step in order with diagrams, the consideration and who receives it, the latest accounts, the commercial reasons for the transaction, and the provisions under which clearance is sought. Anything planned afterwards, such as a sale or a gift of shares, must also be disclosed.

Because the main purpose test looks at the arrangements as a whole, not just the share exchange. A planned sale, a buy-back, a demerger or a large dividend could change HMRC's view of why the holding company is being inserted. A clearance is void if material facts are not fully and accurately disclosed, so it is safer to explain future plans honestly than to leave them out.

If HMRC asks for further particulars and they aren't provided within 30 days, or any longer period HMRC allows, HMRC need not proceed with the application. That effectively leaves you without clearance. If the answers will take time, for example because accounts are being finalised, it's best to tell HMRC and agree an extension rather than let the deadline pass.

Only for the transaction as described in the application. If the steps change, the share numbers differ, or new arrangements are added, the clearance may not cover what was actually done. The transactions in securities clearance specifically does not prevent HMRC acting on a wider set of transactions that includes others. If the plan changes before completion, we update HMRC and seek a fresh or amended clearance.

Yes. Within 30 days of HMRC notifying a refusal, or of HMRC failing to decide within its time limit, you can require HMRC to send the application, with any further particulars, to the tax tribunal for a decision. There is no equivalent right for a section 701 transactions in securities clearance. In practice, answering HMRC's concerns or adjusting the steps is often quicker than going to the tribunal.

HMRC doesn't withdraw a clearance on a whim, but a clearance is void if the application did not fully and accurately disclose all the facts and considerations material to HMRC's decision. Both section 138 TCGA 1992 and section 702 ITA 2007 say so. That's why we take care to describe the commercial background, the shareholders and any future plans accurately, rather than writing the shortest possible letter.

No. Stamp duty share acquisition relief under section 77 of the Finance Act 1986 is not part of the statutory clearance procedure. The stock transfer forms are sent to HMRC's Stamp Taxes team for adjudication after the exchange, within 30 days of signing, with details of the relief claimed. Adjudication is compulsory to obtain the relief, and it is a separate step from the section 138 and section 701 clearances.

No. A section 138 or section 701 clearance only confirms that the specific anti-avoidance rules won't be applied to the transaction. It says nothing about business asset disposal relief, the substantial shareholding exemption, inheritance tax business relief, corporation tax, valuations or employment-related securities. Those positions depend on the facts at the time of a later sale or gift, and need to be checked separately.

When a company buy-back forms part of the plan, for example where a shareholder is leaving before the holding company is inserted and the trading company is buying their shares. Section 1044 CTA 2010 asks HMRC to confirm that capital treatment under section 1033 applies, so the seller is taxed on a capital gain rather than a distribution. Unlike section 138 and section 701, it has no statutory time limit for HMRC's reply.

Only if a statutory demerger is part of the plan, for example where a holding company structure is being used to split a trading business from a property business. Section 1091 CTA 2010 asks HMRC to confirm that a distribution will be an exempt distribution. A section 139 clearance may also be relevant where a business is being transferred between companies under a scheme of reconstruction. Both can go in the same combined application.

It's HMRC's written view on how the law applies where there's genuine uncertainty about a transaction. HMRC usually replies within 28 days. It isn't available where a statutory clearance covers the point, for tax planning or on questions of fact. Most holding company insertions don't need one, because sections 138 and 701 cover the main risks, but it can occasionally help on a separate point of interpretation.

You can, but you lose the point of applying. A section 138 clearance has to be obtained before the shares are issued, so issuing them early means the application can no longer protect the share exchange. That's why the share exchange agreement is usually made conditional on clearance, or simply signed once HMRC's letter arrives. If timing is tight, it's better to plan the application earlier than to complete without it.

Clearly mark it as market sensitive. HMRC asks for this where the information could affect a share price or concerns the financial affairs of well-known people, and gives those applications extra security handling. Email attachments should be no larger than 2MB and self-extracting zip files are blocked. Postal applications go to BAI Clearance, HMRC, BX9 1JL.

A holding company is a company that owns shares in one or more other companies, called its subsidiaries. Under the Companies Act 2006, a company is another company's holding company if it holds a majority of the voting rights, can appoint or remove a majority of the board, or controls a majority of the votes under an agreement with other members. For owner-managers, it usually means a new company that owns 100% of the existing trading company.

You and any co-shareholders own the holding company, and the holding company owns the trading company. The trading company carries on as before, with the same staff, customers and contracts. When it has surplus profit, it can pay a dividend up to the holding company, normally free of corporation tax. The holding company can then keep that cash safe, invest it, lend it within the group or pay dividends on to you when you choose.

Often very little. Many holding companies simply own shares in their subsidiaries, receive dividends, hold surplus cash or investments and pay dividends to the shareholders. Some do more, such as providing management services, employing the directors, owning the group's property or lending money to subsidiaries. What it does matters for tax, because it affects the associated companies rules, trading status for reliefs and whether it can be treated as a passive holding company.

No, but the percentage matters. Company law treats a company as a subsidiary if the holding company has a majority of its voting rights or controls its board. For tax, 51% matters for associated companies and trading groups, 75% for group relief and capital gains groups, and 10% for the substantial shareholding exemption. Owner-managers usually have the holding company own 100% of each subsidiary, which meets every test and keeps things simple.

Yes. A holding company can own any number of subsidiaries, each running a separate business. That keeps each business's risks, contracts and creditors apart, and lets you sell, close or bring in partners for one without disturbing the others. Within a 75% group, losses in one company can usually be set against profits of another, and assets can move between companies without an immediate tax charge on chargeable gains.

Yes. A holding company can own property itself, or the group can hold property in a separate subsidiary. Many owner-managers prefer a dedicated property company in the group, because it keeps the property apart from both the trade and the holding company's cash. Where property is held matters for tax: substantial investment activity can affect the group's trading status, which matters for Business Asset Disposal Relief, the substantial shareholding exemption and inheritance tax Business Relief.

Yes. A holding company is a separate legal company, so it needs at least one director, its own registered office, its own statutory registers and its own bank account. In owner-managed groups the directors are usually the same people as in the trading company. Keeping the companies' money, decisions and records properly separate matters, because the protection a group gives depends on each company being treated as distinct.

It can, through what is called a hive-down, where the existing company transfers its trade and assets into a new subsidiary and keeps the shares. It is used less often for owner-managers because contracts, employees, licences and property all have to move, which can bring legal work and tax points such as stamp duty land tax on property. Inserting a new holding company above the existing company usually leaves the trading company untouched.

A holding company sits above a trading business and owns its shares, mainly to protect cash, separate risk and plan for a sale or succession. A family investment company is a company owned by family members that holds investments, often funded by the founder, with share classes designed to give the next generation future growth. The two can work together: a family investment company can sit above a holding company or hold investments alongside the trading group.

Usually not, if its subsidiaries trade. Shares in the holding company of a trading group can qualify for Business Asset Disposal Relief, and holding company shares can qualify for inheritance tax Business Relief where the subsidiaries' businesses are trading. A holding company of trading subsidiaries is also not a close investment-holding company, so the small profits rate and marginal relief stay available. The picture changes if the group's investment activities become substantial.

Yes. A holding company can have as many shareholders as the trading company. On a share-for-share exchange, each shareholder normally receives holding company shares in the same proportions and classes as before, which is also a condition for stamp duty relief. Shareholders who want to go their separate ways later, or hold different parts of the business, may need a demerger rather than a simple holding company, so it is worth discussing long-term plans first.

Yes, but unwinding is rarely free. Removing a holding company or splitting a group usually means a demerger, a liquidation or a sale of shares, each with its own tax and legal steps, and some reliefs claimed when the group was formed can be clawed back if companies leave the group within a set period. That is why it is worth setting up the right structure for your long-term plans, rather than one that only solves today's problem.

Start with what you want to achieve: protecting cash, separating property, adding a business, selling, or passing the business on. Then look at the facts that drive the tax, such as profits, surplus cash, who owns the shares, any property and your timescale. Our Structure Lab lets you try different structures, and a Chartered Tax Adviser can test the options against your figures and tell you honestly whether a holding company is worth it.

Several reliefs do most of the work. Dividends from subsidiaries to the holding company are normally exempt from corporation tax. Capital gains groups let assets move between 75% group companies without a gain, and group relief lets losses be shared. The substantial shareholding exemption can exempt gains when a subsidiary is sold. For shareholders, Business Asset Disposal Relief and inheritance tax Business Relief can apply to holding company shares where the group trades.

Yes. A new venture can be set up as a subsidiary of the holding company, with a new partner or key manager taking shares directly in that subsidiary rather than in your main business. That keeps their stake limited to the venture they are helping to build. The holding company's percentage still matters for tax: below 75% the subsidiary leaves the group for group relief and capital gains, and below 51% further rules change.

Yes. Each company in a group is its own legal person, with its own assets, debts, contracts and directors' duties. That separation is what lets a holding company protect cash and property from a subsidiary's creditors, and lets each business be sold or closed on its own. It can be weakened by cross-guarantees, shared bank security or personal guarantees, and by treating group companies as one in practice, so decisions, records and bank accounts should be kept properly separate.

Not directly, because a holding company owns shares and an unincorporated business has none. The business would first need to move into a limited company, and that company can then sit under a holding company. The two steps can often be planned together, but each has its own tax points, including capital gains tax on the business assets and stamp duty land tax on any property. It is worth settling the end structure before the first step is taken.

Yes. UK holding companies often own subsidiaries abroad, for example to trade in another country. Dividends from an overseas subsidiary can be exempt from UK corporation tax, but the conditions differ: for a small holding company, the paying company must be resident in the UK or in a territory with a suitable double tax treaty. Local taxes, withholding tax on dividends and UK rules aimed at profits diverted overseas also need checking before the structure is set up.

Usually simple. The owners hold shares in a holding company, which owns 100% of the trading company. Many groups then add a property company that owns the premises and lets them to the trading company, and sometimes a second trading subsidiary for a new venture or an acquisition. Surplus cash is often held in the holding company itself. Each company files its own accounts, and the whole group is normally run by the same directors.

Yes. Family members can hold shares in the holding company, either from the start, by holding shares in the trading company before the share exchange, or later by gift or subscription. Gifts between spouses or civil partners living together are normally at no gain, no loss for capital gains tax, while gifts to children are treated as made at market value. Different share classes can give family members income or growth while you keep control, but the tax rules on shifting income need care.

Yes. Some owners have separate holding companies for unrelated businesses or different groups of shareholders, and some add a family investment company above a holding company for succession. Each extra company has its own running costs and is normally an associated company for the corporation tax limits if it carries on a business. More layers are only worthwhile where each has a clear job, such as separating shareholders, risks or a future sale.

An LLP can own shares, but it rarely works as a holding company for owner-managers. An LLP is generally transparent for tax, so dividends it receives are taxed on its members rather than being exempt in the way they would be for a company. That removes the main reason for having a holding company. Reliefs such as the substantial shareholding exemption and group relief also depend on company ownership, so a limited company is almost always the right vehicle.

Sometimes. Some regulators treat a new company in the ownership chain as a change of controller, which may need notice or prior approval even though the same people remain in charge. Financial services firms authorised by the FCA are the best-known example, and other sectors with licensing or professional rules can have similar requirements. Check with your regulator or compliance adviser early, because the approval timetable can be longer than HMRC's clearance timetable.

An intermediate holding company is a subsidiary that itself owns other subsidiaries, so it sits in the middle of a group. Larger owner-managed groups sometimes use one to keep a division together, for example a trading company and its own subsidiaries, so the whole division can be sold or financed as one. For the substantial shareholding exemption, the holding company of a trading subgroup can qualify when it is sold, so each subgroup needs to stay clearly trading.

Yes. Once the share exchange completes, the holding company becomes the trading company's sole shareholder, and the trading company's register of people with significant control will normally show the holding company as a registrable relevant legal entity instead of you. You will then appear as a person with significant control on the holding company's record. Anyone searching Companies House can follow the chain, so the ownership remains transparent.

A typical holding company insertion takes 4 to 6 weeks from the first call to the share exchange. The main part of that is HMRC's 30-day window for replying to the clearance application, which is made before any shares are issued. Stamp duty adjudication and the Companies House filings follow the exchange. A group with several companies, property moving or lender consents to obtain can take longer, so start well before any deadline.

With us, it's a single fee for the whole restructure, agreed in writing before any work starts and exclusive of VAT. You can pay in full or over 2 monthly instalments. The fee depends on your structure, so we confirm your exact fee within 1 working day of you telling us about it. There are three packages, Essential, Premium and No Risk, all quoted on request, and the first call is free.

Yes. The usual route is a new holding company that acquires the shares in both companies from you in exchange for its own new shares, in two share-for-share exchanges carried out together. Done properly, there is normally no capital gains tax for you, because your new holding company shares take over the base cost and history of the shares you gave up. Each exchange must pass the main purpose test that has applied to share exchanges since 26 November 2025, so clearance from HMRC is usually sought first.

Not two separate applications. HMRC accepts one combined application to its Clearance and Counteraction Team covering every step, so a single letter can ask for clearance under section 138 of the Taxation of Chargeable Gains Act 1992 for each share exchange, and under section 701 of the Income Tax Act 2007 for transactions in securities. HMRC respond within 30 days of receiving the application, or within 30 days of receiving any further information they ask for. The application must describe both companies and both exchanges clearly.

It can still be done, but it needs more care. If one company is owned 100% by you and the other 50:50 with a business partner, each person's stake in the new holding company has to reflect what they contribute, so both companies normally need valuing. Your partner would then own part of a group that includes your company, which is a big commercial change. Sometimes a different structure fits better, such as separate holding companies, or keeping the jointly owned business outside the group.

Possibly. Stamp duty at 0.5% applies to the value of shares transferred, but share acquisition relief under section 77 of the Finance Act 1986 can remove it where the holding company issues only shares and its shareholders, share classes and proportions mirror those of the company acquired. Matching those conditions twice, for two companies with different values or owners, is harder than for one. Where relief isn't available, the duty is usually modest compared with the value, but it should be budgeted for. Either way, the transfers go to HMRC for adjudication.

It's simpler, because only one share exchange is needed, but it usually works less well. The second business then sits underneath the first, so its value and risk are tied to the first company, and selling the first company means selling the second with it unless you restructure. A holding company above both keeps each business separate, lets either be sold on its own, and gives the group one place to hold surplus cash. We usually recommend the side-by-side structure.

If you already have a holding company, a subsidiary is usually better. Profits can be moved up to the holding company as tax-free dividends and down to the new venture without paying personal tax first, and a start-up's early losses can reduce the profitable company's corporation tax through group relief. A company you own personally keeps the two businesses further apart, which can suit a venture with outside investors, but it can only be funded from money you have already paid personal tax on.

In principle, yes. Each company is a separate legal person with limited liability, so the creditors of a failed subsidiary normally have no claim against its sister company or the holding company's other assets. The protection is weakened by anything that links the companies: parent company guarantees, cross-guarantees to a bank, intercompany loans the failing company can't repay, or one company paying another's debts. The ring-fence is only as strong as the paperwork around it, so these links should be kept to a minimum.

It can. Lenders to a group often ask each company to guarantee the others' borrowing and take security over all of their assets. If one subsidiary then defaults, the bank can call on the healthy subsidiary and its assets, which is exactly what the structure was meant to prevent. Before signing group facilities, look at whether the new venture can be funded separately, or whether guarantees can be limited to particular companies or amounts. It's a commercial negotiation, but worth having before the paperwork is signed.

The usual route is in two steps. The profitable company pays a dividend to the holding company, which is exempt from corporation tax, provided the company has enough distributable reserves. The holding company then puts the money into the new subsidiary, either by subscribing for more shares or by making a loan. Shares make the money permanent capital; a loan can be repaid when the venture succeeds and ranks as a debt if it fails. No personal tax arises because the money never reaches the shareholders.

Yes, a direct loan between sister companies is possible, and the section 455 charge on loans to shareholders doesn't normally apply to a loan from one company to another. The bigger questions are commercial and legal. The lending company's directors must be satisfied that the loan is in that company's interests, and if the borrower fails, the lender's cash is lost too, which undermines the ring-fence. Routing money through the holding company, as dividends up and then capital or loans down, is usually cleaner.

Yes, through group relief, if both companies are 75% subsidiaries of the same holding company. The start-up surrenders its trading loss for a period to the profitable company, which deducts it from its profits for the overlapping period. With the profitable company paying 25%, an £80,000 loss surrendered saves £20,000 of corporation tax straight away, instead of the start-up waiting years to use the loss itself. The claim is made on the claimant company's tax return, with the surrendering company's consent.

Yes. For group relief, the holding company must own at least 75% of the ordinary share capital and be entitled to at least 75% of the distributable profits and of assets on a winding up. If you give a co-founder or investor more than 25%, the venture leaves the group relief group, although it can still count as an associated company and still qualify for the substantial shareholding exemption on a later sale. Option schemes and investment terms should be checked against the 75% line before they are agreed.

It may. Two companies you control are already associated with each other, so each has the £50,000 and £250,000 limits halved. Adding a holding company that has its own assets, income or costs makes it a third associated company, so the limits for each company are divided by three: £16,667 and £83,333. If the holding company is passive under section 18F of the Corporation Tax Act 2010, it is disregarded and the limits stay halved. Companies with profits above £250,000 are unaffected.

Where the holding company genuinely provides services, such as employing the directors, running finance or managing group property, a charge to each subsidiary can make sense. The fee should reflect the work done and the cost of providing it, be set out in a written agreement, and be invoiced regularly. A charge that's just a way of moving profit around is hard to justify. Charging fees also stops the holding company being passive, so it will count as an associated company.

If the holding company makes management charges, those are normally supplies for VAT, so it may need to register and charge VAT, which the subsidiaries can usually recover if they make taxable supplies. Many groups instead form a VAT group, so the companies share one VAT registration and supplies between them are ignored. Being in a VAT group makes every member jointly liable for the group's VAT, which is worth weighing if you want to keep a risky venture separate.

Yes, and that's one of the main reasons for the structure. The holding company sells the shares in one subsidiary and keeps the other. If the holding company has owned at least 10% for 12 months within the six years before the sale and the subsidiary has been trading, the substantial shareholding exemption makes the gain free of corporation tax. The proceeds stay in the holding company, available to reinvest or to fund the remaining business, and are taxed personally only when paid out.

Group relief can stop before completion. Section 154 of the Corporation Tax Act 2010 treats companies as no longer in the same group once arrangements exist under which the subsidiary could leave the group, and those arrangements can exist well before the share purchase agreement is signed. Losses for that period may then not be shareable between the company being sold and the rest of the group. Intercompany balances, management charges and any group VAT registration also need unwinding as part of the sale.

A genuinely dormant company has no activity, so it adds little to the group-wide test, although any assets it holds still count. A company holding investments, surplus cash or let property is different: its activities are added to the group's when HMRC asks whether non-trading activity is substantial, usually taken as more than 20%. That matters for business asset disposal relief on a sale of holding company shares and for the substantial shareholding exemption on a subsidiary that has its own subsidiaries.

There's no legal requirement, but aligning year ends usually helps. Group relief works on overlapping periods, so with different year ends each claim has to be apportioned between periods by time, which adds work and can limit how much loss is usable. Group accounts, where needed, are simpler with one year end, and the holding company can match them too. Changing a subsidiary's accounting reference date is a routine Companies House filing, although there are limits on how often a period can be extended.

Yes. Each company, including the holding company, remains a separate company, so each files its own accounts at Companies House and its own corporation tax return with HMRC, even if it is dormant or passive. A small group is exempt from preparing consolidated group accounts, though it can choose to. Group relief claims, management charges and intercompany balances add a little work at year end, so it helps if one accountant prepares all the companies' accounts together.

They can. Shares don't normally qualify if a company's business is wholly or mainly making or holding investments, and a holding company could look like an investment company. But the inheritance tax rules make an exception for a company whose business is wholly or mainly being the holding company of companies that trade. So where your subsidiaries carry on a trade, shares in the holding company can qualify, subject to the excepted assets rules.

Normally not. Business Relief needs the shares to have been owned for two years, but where new holding company shares are treated as the same asset as your old trading company shares under the capital gains share exchange rules, your period of owning the old shares counts. So a properly structured share-for-share exchange carries your ownership history across. If the exchange is not treated that way, for example because cash was paid, the position needs checking.

From 6 April 2026, 100% Business Relief and Agricultural Relief apply to the first £2.5m of combined qualifying property per person. Qualifying value above £2.5m gets 50% relief, which means an effective inheritance tax rate of 20% on the excess. The allowance is due to be increased with inflation from April 2031. Originally announced as £1m, it was raised to £2.5m in December 2025, so older guidance may show the lower figure.

Yes. From 6 April 2026, any unused part of the £2.5m allowance for 100% relief can be transferred to a surviving spouse or civil partner, in a similar way to the nil-rate band. A married couple can therefore shelter up to £5m of qualifying business property at 100% between them, if the planning and wills are right. How shares are left on the first death affects how much allowance is available on the second.

An asset escapes the excepted assets rule if it is required at the time of the gift or death for future use in the business. For cash, that means money genuinely earmarked for something the group will do, such as a planned acquisition, new premises, equipment or known liabilities, rather than general reserves. Board minutes, budgets and plans made at the time are the best evidence. Cash with no identified purpose risks being excluded from relief.

Yes. For the excepted assets rules, use by another member of the same group counts as use for the business. So a property owned by the holding company and occupied by the trading subsidiary is not an excepted asset just because the holding company itself doesn't trade. That makes it possible to hold the trading premises at the top of the group without losing relief on that part of the value.

It can. Where one company in a group mainly holds investments, the holding company's shares are valued for Business Relief as if that company were not in the group. In practice, the value of a let property or investment subsidiary gets no relief, even if the rest of the group trades. There is an exception for a company mainly holding land or buildings occupied by trading group members, such as a company owning the group's own premises.

Then the holding company shares may not qualify at all. Relief is not available if the business consists wholly or mainly of making or holding investments, and a holding company only escapes that rule where its subsidiaries mainly trade. If property or investments make up most of the value, relief can be lost on everything, not just the investment part. Separating the investments, for example through a demerger, can protect relief on the trading shares.

It's often worth considering. Investment property usually doesn't qualify for Business Relief whether it sits inside or outside the group, but leaving it inside can restrict relief on the trading shares or put the whole group's relief at risk. Moving it into a separate company owned side by side can make the trading shares' position clearer. The property company itself will still be in your estate, so other planning may be needed for it.

Usually, yes, once there is a binding contract for sale. Shares subject to a binding contract at the time of death or a gift are not treated as relevant business property, because the value is about to become cash. There are exceptions for sales in exchange for shares as part of a reconstruction or amalgamation. Shareholder agreements should be checked too: HMRC treat options to buy differently from agreements that amount to a binding contract for sale.

A gift to an individual is a potentially exempt transfer, so there is no inheritance tax if you survive seven years. If you die within seven years, Business Relief can still reduce the value, but only if your child has kept the shares from the gift until your death and they still qualify for relief at that point. If your child sells the shares, or the company changes character, before then, the relief can fall away.

Usually a gift is treated as a sale at market value, so a capital gains tax charge can arise even though nothing is paid. Gift holdover relief can defer the gain for shares in an unlisted trading company or the holding company of a trading group, with the recipient taking over your base cost. The relief can be restricted where the group holds non-business assets such as investment property, so the group's make-up matters here too.

There's a trade-off. A lifetime gift can take future growth out of your estate, but may involve capital gains tax unless holdover relief applies, and the seven-year survival period. Shares held until death are uplifted to market value for capital gains tax, so your heirs inherit at today's value. With 100% Business Relief now capped at £2.5m per person, many families are revisiting the balance between gifts and inheritance.

You can. A transfer into a discretionary trust is a chargeable transfer, with 20% inheritance tax on value above the available nil-rate band, but Business Relief can reduce the value transferred where the shares qualify. Trusts also face ten-year and exit charges of up to 6%. A separate £2.5m allowance for 100% relief applies to relievable property held in trusts. Trusts can keep control with the family while value passes down.

Rarely. Business Relief is claimed after a death or a chargeable gift, and HMRC review the company's activities and assets at that point. HMRC's non-statutory clearance service only deals with genuine uncertainty about how the law applies, not with matters of fact or tax planning, and whether a group is mainly trading is largely a question of fact. The best protection is a well-documented structure and regular reviews while you are alive.

Your will should be written with the Business Relief rules in mind. Leaving qualifying shares to a spouse is exempt anyway, which can waste relief unless the unused allowance passes across. Leaving them to children or a trust may use relief on the first death. The articles of the holding company, any shareholder agreement and your will should all point the same way, so that shares end up with the right people without triggering a sale.

Yes. From 6 April 2027, most unused pension funds and death benefits will come into the estate for inheritance tax, with personal representatives responsible for reporting and paying. For business owners who have built up pension savings alongside their companies, that changes the overall estate value and how the £2.5m Business Relief allowance, the nil-rate band and gifts should be planned. It's worth reviewing the whole picture together.

Whenever the group changes shape, and at least every few years. Inserting a holding company, building up cash, buying property, adding an investment subsidiary or agreeing a sale can all change the Business Relief position. The April 2026 changes mean many owners with groups worth more than £2.5m now have a real inheritance tax exposure for the first time, so a review now is sensible even if nothing else has changed.

The usual route is a share-for-share exchange. A new company is incorporated, and you and the other shareholders transfer all your shares in the trading company to it. In return, the new company issues its own shares to you, in the same classes and proportions. The new company then owns 100% of the trading company. HMRC clearances are normally obtained first, and the stock transfer form is sent to HMRC to claim stamp duty relief.

The holding company is incorporated in the usual way. After the share exchange, it files a return of allotment, form SH01, with a statement of capital, within one month of issuing its shares. The trading company updates its register of members and its register of people with significant control, which will now show the holding company, and notifies Companies House of the change. Both companies then file confirmation statements as normal.

Generally no. Because the new holding company shares are treated as the same asset as your original shares, HMRC looks through the exchange and counts the trading company's history towards the two-year qualifying period. After the exchange, though, the conditions have to be met by reference to the holding company: you must hold at least 5% of it, be an officer or employee of a group company, and the group must be a trading group.

When there is no real purpose for it. If you have little surplus cash, no property or second venture, and no sale or succession plans, a holding company may only add admin and cost you corporation tax through the associated companies rules. It can also be the wrong tool where shareholders want to split up, where a sale is imminent, or where a different structure, such as a demerger or a property company, solves the actual problem better.

Typically a share exchange agreement between the shareholders and the holding company, stock transfer forms for the trading company shares, board minutes and shareholder resolutions for both companies, share certificates for the new holding company shares and updated statutory registers. The holding company usually needs articles of association mirroring the trading company's share rights, and a new shareholders' agreement. Your solicitor normally prepares these alongside our tax work.

Usually, yes, at least at first. Owner-managers normally sit on both boards, which keeps decision-making simple. There is no legal requirement for the boards to match, and some groups later add non-executives at holding company level or managers on a subsidiary board. Being an officer or employee of a group company matters for Business Asset Disposal Relief, so shareholders hoping to claim it should keep a qualifying role somewhere in the group.

Broadly: plan the structure and check the reasons; incorporate the holding company with suitable articles; apply to HMRC for clearance under section 138 and section 701; obtain lender and other consents; sign the share exchange agreement and stock transfer forms; allot the holding company shares and update the registers; send the stock transfer form for stamp duty adjudication; and file the return of allotment at Companies House within one month. The share issue must come after clearance, because section 138 clearance has to be obtained before the shares are issued.

Yes. There is no need to wait for a year end, and the trading company's accounting period carries on as normal. The holding company sets its own accounting reference date, usually matching the subsidiary's, because the directors of a parent company must make sure subsidiaries' financial years coincide with its own unless there are good reasons not to. For corporation tax, companies are associated for the whole accounting period if they are associated at any time in it, so the halved limits apply from the start of that period.

It stays where it is. A loan between you and the trading company is not affected by the share exchange and does not move to the holding company automatically. If you owe the trading company money, the usual rules on loans to participators continue, including the section 455 charge, at 35.75% for loans made on or after 6 April 2026, if the loan isn't repaid in time. Any plan to clear or move the balance using group funds should be raised before the clearance application is made.

Each shareholder signs the share exchange agreement and a stock transfer form for their trading company shares. The holding company's directors approve the agreement and allot the new shares, and the trading company's directors approve the registration of the transfers. Shareholder resolutions may be needed in either company, for example to give the directors authority to allot shares or to adopt new articles. Signing usually happens on one day, with documents prepared in advance by the solicitor and checked against the clearance.

The follow-up work matters as much as the exchange. The stock transfer form goes to HMRC for stamp duty adjudication, the holding company files its return of allotment within one month, and both companies update their registers, including people with significant control. Bank mandates, insurance and the accountant's records should reflect the new group. Then the group starts working as planned: dividends to the holding company properly declared, intra-group arrangements documented and corporation tax worked out on the new limits.

Yes. The holding company is normally set up with the same share classes and rights as the trading company, and each shareholder receives the same number and class of holding company shares as they held before. Mirroring the classes and proportions is a condition of stamp duty share acquisition relief. Where alphabet shares or growth shares exist, the articles need careful drafting so that dividend rights work as intended at holding company level, without unintentionally shifting value between shareholders.

Not for the share exchange itself, which involves no payment by the trading company. Reserves matter afterwards, because the trading company can only pay dividends up to the holding company out of its distributable profits, and the holding company can only pay dividends to you out of its own. A newly inserted holding company typically starts with no reserves of its own, so its distributable reserves build up as dividends arrive from the trading company.

No. The trading company keeps its VAT registration, PAYE scheme, corporation tax reference and company number, because it is the same company with a new owner of its shares. The holding company may need its own VAT or PAYE registration if it makes taxable supplies or employs staff, for example by charging management fees or putting directors on its payroll. Whether to form a VAT group is a separate decision that can be looked at once the structure is in place.

Yes, provided the transaction goes ahead as described in the application. Clearance must be in place before the holding company issues its shares, so completion is normally timed shortly after HMRC's letter. A clearance is void if the application did not fully and accurately disclose all the facts material to HMRC's decision, so if anything has changed, such as shareholdings, share classes or plans after the exchange, check with your adviser before signing.

Usually, yes. Until the share exchange completes, dividends from the trading company are paid to you as its shareholder and taxed in the normal way. After completion, they are paid to the holding company instead, and you take dividends from the holding company. Unusually large dividends or capital payments around the time of the insertion should be discussed first and disclosed in the clearance application, because HMRC looks at the whole arrangement, including any value taken out.

Your old share certificates for the trading company are cancelled once the transfers to the holding company are registered, and the trading company issues a new certificate to the holding company for all its shares. The holding company then issues certificates to each shareholder for their new shares. The timing of the register updates needs to fit with the stamp duty adjudication, so the sequence is agreed between your solicitor and tax adviser before completion.

The existing agreement covers shares in the trading company, which will all be owned by the holding company after the exchange, so it usually needs to be replaced. The normal approach is a new shareholders' agreement at holding company level, covering the same points, such as board control, dividend policy, leaver rules and share transfers, often updated at the same time. The old agreement is then ended or amended, so the two documents don't conflict.

It is possible, but a new company is usually cleaner. An existing company brings its own history, assets, liabilities and tax position into the group, which can complicate the clearance and affect the group's trading status. Stamp duty relief also requires the holding company's shareholders and share classes, after the exchange, to mirror the trading company's, which an existing company may not do. A fresh company with nothing in it makes the share exchange simpler to explain and to document.

Ideally two years or more. Business Asset Disposal Relief looks at the two years before a sale, the substantial shareholding exemption needs a 12-month holding of a trading company, and SDLT group relief can be clawed back if a property-owning company leaves the group within three years. HMRC's guidance on the new main purpose test also favours restructuring that is completed well before a deal and then left to run. Starting early keeps every option open.

Sometimes, but the options narrow. Once a buyer is identified, some reliefs stop working: stamp duty relief on a share exchange can be denied where there are arrangements for someone to obtain control of the new holding company, and SDLT group relief is not available where there are arrangements for the company to leave the group. Every step taken close to a sale also needs a clear commercial reason. A late restructure is possible, but it needs careful design.

It depends on how you want to sell. A holding company lets you sell a subsidiary with the substantial shareholding exemption, so the proceeds arrive in the holding company free of corporation tax, or sell the whole group with Business Asset Disposal Relief on your shares. Inserting it early, with HMRC clearance, gives you the choice. Inserting it on the eve of a sale, purely to change the tax result, is much harder to justify.

Usually, yes. Since 26 November 2025 the share exchange and reconstruction reliefs have been subject to a main purpose test rather than the old bona fide commercial reasons test. HMRC's guidance says that restructuring so a later share sale qualifies for a relief, such as separating investment and trading activities, is not caught where the relief's conditions are met throughout the relevant period after the restructuring. Timing and genuine separation are what make it work.

The usual options are a dividend to shareholders, which is taxed at 10.75%, 35.75% or 39.35% in 2026/27, or moving the cash up to a holding company as a tax-free intra-group dividend and keeping it in the group. A third option is to separate the cash into a sister company through a demerger. Which works best depends on whether you want the cash personally now, and on how the buyer is pricing the deal.

Yes, and many sellers do, because buyers often want the trade but not the freehold. The property can be separated into a company owned by the same shareholders through a demerger, or distributed to the shareholders as a dividend in specie. A demerger is usually preferred, because a dividend in specie of property is normally taxed as income on the shareholders. SDLT and any earlier group relief claims need checking first.

A hive-down moves a trade, or part of one, into a new subsidiary, so that a buyer can purchase the shares of a clean company containing only what it wants. The transfer between group companies is normally at no gain and no loss, and the seller can then sell the new subsidiary's shares, often with the substantial shareholding exemption. It is common where a group is selling one division but keeping the rest.

It depends on what the buyer wants and what the existing company carries. A hive-down lets the buyer acquire a new company containing only the chosen business, leaving old liabilities, surplus assets and other activities behind with you. But contracts, employees, licences and property all have to move, which takes time and can cost SDLT. Selling the existing company is simpler, but the buyer will want wider warranties and indemnities to cover its past.

Usually not for the seller. On an asset sale the company itself pays corporation tax on the gains on its assets, and the substantial shareholding exemption doesn't help because it only covers disposals of shares. The money is then still in the company. Buyers sometimes prefer assets to avoid inheriting history, which is one reason a hive-down is used: it turns an asset deal into a share deal.

Often, yes. SDLT group relief is not available where there are arrangements at the time for the purchasing company to leave the group, and relief already given is withdrawn if it leaves within three years while still holding the property. So moving a freehold into a subsidiary shortly before selling that subsidiary will usually cost SDLT at market value. Where property is involved, it is often better to restructure long before a sale or leave the property where it is.

If you sell the holding company's shares, you pay capital gains tax personally, with Business Asset Disposal Relief at 18% on up to £1m of qualifying gains. If the holding company sells the subsidiary with the substantial shareholding exemption, there is no corporation tax on the gain, but the cash sits in the holding company and is taxed when you take it out. The right answer turns on what you plan to do with the money.

It stays in the holding company, free of corporation tax on the gain if the substantial shareholding exemption applied. You can reinvest it, use it to start or buy another business, or extract it over time as dividends. Be aware that a holding company sitting on cash after a sale may stop being a trading company, which can affect Business Asset Disposal Relief, Business Relief for inheritance tax and the corporation tax rate it pays.

A members' voluntary liquidation can turn the cash into a capital distribution, which may be taxed at capital gains tax rates. But an anti-avoidance rule can tax liquidation distributions as income where the shareholder holds at least 5%, the company is close, and within two years the shareholder carries on a similar trade or activity, if a main purpose is to avoid income tax. Plans after the sale need to be thought through first.

Clearance is not compulsory, but it is normally obtained for any share exchange, demerger or reconstruction ahead of a sale. Applications under section 138 (capital gains) and section 701 (transactions in securities) are usually made together, with section 1091 added for a statutory demerger, and HMRC respond within 30 days. Buyers and their advisers will expect to see the clearance letters in the due diligence pack.

The buyer's advisers will review how the group was put together: share exchanges and their clearances, stamp duty claims, intra-group transfers that could trigger degrouping or SDLT clawback, and whether the companies have always been trading. They will also check dividends, loans to shareholders and corporation tax filings. Problems found in due diligence usually lead to price reductions, retentions or specific indemnities, so tidy records matter.

Tax warranty and indemnity claim periods in a share sale agreement are commonly four to seven years, depending on what is negotiated. That means any weakness in a pre-sale restructure can come back to you after completion. Getting HMRC clearance in advance and keeping a clear paper trail of the commercial reasons for each step reduces the risk of a claim, and makes the warranty negotiation easier.

It can if it is not planned. Converting, cancelling or reorganising shares is usually a reorganisation that defers capital gains, but changes that move value between shareholders can be treated as disposals or gifts, and changes made shortly before a sale can affect the 5% personal company test for Business Asset Disposal Relief. Value shifts also raise transactions in securities questions. It is worth reviewing share rights at least two years before you expect to sell.

It can. Business Relief is normally lost once there is a binding contract to sell the shares, because the value is about to become cash. Separating property or investments before a sale changes which companies qualify, and cash held in a holding company after a sale will not usually qualify at all. If inheritance tax matters to you, the restructure and your estate planning should be looked at together, ideally before a deal is agreed.

You will normally need a tax adviser to design the steps and obtain clearance, a corporate lawyer for the share exchange, demerger or hive-down documents, and your accountant for the accounts and filings. Your corporate finance adviser should know the plan, because it affects what is being sold. We work alongside your existing advisers, and our sister firm Transaction Tax Partners supports the deal itself.

Mainly to protect the property from the risks of the trade. If the trading company fails, its assets go to its creditors; premises owned by a sister property company are not the trading company's assets. A separate property company also makes it easier to sell the trading business without the building, to bring in a different lender, or to pass the property and the business to different family members later. The rent paid between the companies keeps it commercial.

Three things in particular. Relief is not available if, when the transfer happens, there are arrangements for the property company to leave the group, or for the consideration to be provided by someone outside the group. It is also denied where the transfer is not for bona fide commercial reasons or has tax avoidance as a main purpose. So a transfer made shortly before an agreed sale or demerger of the property company needs particular care.

Relief is withdrawn if the property company leaves the group within three years of the transfer, or later under arrangements made in that period, while it still holds the property. SDLT is then charged on the property's market value at the time of the original transfer, and must be reported on a further return within 30 days. There are exceptions, for example on some liquidations. Selling the trading company is treated differently, but a later change in control of the property company can still trigger a charge.

Not immediately, where both companies are in the same 75% capital gains group. The transfer is treated as taking place at no gain and no loss, so the property company takes over the trading company's base cost. But if the property company leaves the group within six years while still owning the premises, a degrouping charge can arise, calculated as if it had sold and reacquired the property at its market value on the date of the original transfer.

Often, if you have or are planning a holding company. Buying through a new property subsidiary means the building never sits in the trading company, so there is nothing to move later and no group relief clawback period to watch. The purchase is taxed in the normal way, at non-residential SDLT rates for commercial premises, and the lender will look at the group as a whole. Funding usually comes from surplus cash moved up to the holding company or bank borrowing.

A market rent, documented in a written lease, is the safest approach. The rent is usually deductible for the trading company and taxable in the property company, so within the group the corporation tax roughly washes through. A proper lease matters for other reasons: it supports the protection if the trading company fails, it gives a lender something to value, and it makes a later sale or demerger cleaner. A surveyor's view on rent is helpful.

Generally not. For Business Asset Disposal Relief the activities of all the group companies are treated as one business, and activities between group members are disregarded. So a property company letting premises only to a trading subsidiary in the same group is, in effect, part of the group's trading business. Letting space to outside tenants is different: that rent and the value of that space count as non-trading when HMRC weighs the 20% indicators.

Not usually. SSE looks at whether the subsidiary being sold, with any companies below it, was trading throughout the qualifying period. A property company sitting alongside the trading subsidiary, owned directly by the holding company, is not part of what is sold, so it doesn't count in that test. Selling the property company itself is different: it is an investment company, so SSE normally won't apply to a gain on its shares.

This needs care. Under section 18N, commercial letting is a permitted purpose, but a letting to a connected person, which includes a fellow group company, is not treated as commercial. So that heading does not help. However, another permitted purpose is a company existing for the purposes of a trade carried on commercially by a qualifying company in the group. A property company providing the group's trading premises may fall within it, but the facts need checking.

It usually needn't, provided the trading companies make up most of the group's value. Normally, a group company whose business is holding investments is ignored in valuing the holding company's shares for Business Relief, which would strip out the property's value. But there is an exception in section 111 of the Inheritance Tax Act 1984 for a company mainly holding land or buildings mainly occupied by the group's trading companies. That exception stops applying if the premises are let outside the group, for example to a buyer after the trading company is sold.

It can, because of the associated companies rules. The 19% and 25% corporation tax limits are divided between all the companies under common control that carry on a business, and a property company letting premises carries on a business. In a group of a non-passive holding company, a trading company and a property company, each company's limits fall to one third. For groups already paying the 25% main rate on most profits the difference is small.

Yes. Many lenders are comfortable lending to a property company that owns commercial premises let to a trading company in the same group, with a lease in place. Lenders often ask for cross-guarantees from other group companies, which can weaken the separation you created, so the terms are worth negotiating. Interest on the borrowing is usually deductible for the property company against its rental income.

Yes, and this is a common reason for the structure. The holding company sells the trading subsidiary, often with the substantial shareholding exemption, and keeps the property company. The buyer then takes a lease from the property company, so the group keeps a rental income. If the property was moved from the trading company within the last three years, check the SDLT position before the sale, because a later change in control of the property company can trigger a clawback.

Usually by a demerger, so you own the trading group and the property company side by side rather than one under the other. The statutory demerger rules are aimed at trading businesses, so property is often separated through a capital reduction or a liquidation demerger. Each needs HMRC clearances and careful planning for capital gains, stamp duty land tax and the anti-avoidance rules. It is best planned well before any sale.

It depends on your aims. Personal ownership puts rent directly in your hands, taxed as income, and keeps the property out of the company structure, but the property is then exposed to your personal position and part of your estate outside any company planning. Group ownership keeps the rent in the companies at corporation tax rates and supports the protection and inheritance tax points above. Moving property in either direction later can trigger tax.

Generally, yes, if the rent is a genuine business expense at a commercial level. The rent is a deduction for the trading company and taxable income for the property company. If one company makes a loss and both are in a 75% group, group relief can usually let one company's loss reduce the other's profits. Rent well above market value invites challenge, so a proper lease at a market rent is the best protection.

It can, but buy-to-let or commercial property let to outsiders changes the picture. That rental business is non-trading, so it counts in the 20% indicators for Business Asset Disposal Relief, and falls outside the inheritance tax exception for property occupied by the group. (Letting to unconnected tenants on commercial terms doesn't of itself make the property company a close investment-holding company.) If you plan to build an investment portfolio, it is often better held outside the trading group altogether.

Not in tax terms. A property company that only owns premises used by your group's trading companies behaves, for most purposes, like part of the trading group. A property investment company letting to outside tenants is running a separate investment business, with different consequences for reliefs and corporation tax. The legal form is the same, but HMRC looks at what the company actually does and who occupies its buildings.

Each dividend up should be supported by accounts showing enough distributable profits, either the last annual accounts or interim accounts, a cash forecast showing the trading company can still pay its debts and fund the trade, a board minute recording the decision and the reasons, and a dividend voucher. The dividend is normally exempt from corporation tax for the holding company, but the protection it gives depends on it being lawful, so the paperwork matters.

It can help a great deal. Once cash has been lawfully paid up as a dividend, it belongs to the holding company, a separate legal person, so the trading company's creditors generally cannot reach it. The protection is weaker if the holding company has guaranteed the trading company's borrowing or leases, if the dividend was unlawful, or if it was paid when the trading company was already in financial difficulty, because a liquidator can challenge some earlier transactions.

There is no fixed rule. Many groups review the position at each year end, or quarterly, and move up whatever the trading company doesn't need for working capital, tax, planned investment and a sensible buffer. Regular, documented dividends keep the trading company's balance sheet lean and build the holding company's reserves. Each dividend still needs distributable profits and a proper board decision in the paying company.

Directors must act in the company's interests, and when a company is insolvent or close to it they must give weight to its creditors' interests. A dividend paid from proper distributable profits while the trading company is healthy and can meet its debts is normal group housekeeping. Problems arise when cash is stripped out while the company is struggling, or without checking that the accounts support the dividend. Minuting the reasons and the cash forecast is good practice.

It can. For Business Asset Disposal Relief your holding company must head a trading group, and the group is judged as a whole. HMRC's guidance treats more than 20% non-trading activity as substantial, looking at indicators such as assets, income, expenses and management time. Cash moved up from a trading subsidiary is still in the group, so a large, long-held surplus can count against trading status, even though it sits in the holding company rather than the trade.

It can, though the test is applied to the company being sold. The substantial shareholding exemption needs the subsidiary sold, with any companies below it, to be a trading company or the head of a trading group throughout the qualifying period. Surplus cash or investments built up inside the subsidiary being sold are what matter most. Cash held in the holding company itself no longer affects SSE, because the condition about the selling company trading was removed in 2017.

It can be. Business Relief excludes the value of excepted assets, which are assets not used wholly or mainly for the business in the last two years and not required for future use. Use by another group company counts as business use. Cash earmarked for a planned purchase or genuine working capital needs is usually fine; a large surplus with no business purpose is likely to be excepted, so that part of your shares' value gets no relief.

HMRC's Capital Gains Manual treats non-trading activity above 20% as substantial. It looks at several indicators, including the share of the group's assets and income that are non-trading, and the expenses and time spent on non-trading work. These are indicators, not strict percentage tests, and HMRC weighs them together. Cash kept to meet the trade's needs is part of the trade; long-term retention of surplus profits may be an investment activity.

Each route has trade-offs. Investing in the holding company is simple but puts the investments next to the shares in your trading subsidiaries. A subsidiary investment company ring-fences the investments and keeps records clean, but it is still part of the group for the trading-group tests. A sister company owned directly by you sits outside the group, but cash usually has to pass through your hands as a taxed dividend to get there, unless the group is later demerged.

Usually, yes. A close company that does not exist wholly or mainly for permitted purposes, such as trading, commercial letting to unconnected tenants or holding shares in trading companies, is a close investment-holding company under section 18N of the Corporation Tax Act 2010. An investment subsidiary holding shares, funds or bonds normally falls into that category, so it pays the 25% main rate on all its profits, with no small profits rate or marginal relief.

Not just because it keeps some cash. A holding company whose main purpose is holding shares in trading subsidiaries, coordinating them or lending to them exists for permitted purposes, so it is not a close investment-holding company. The risk grows if, over time, the holding company's main activity becomes managing a large portfolio of investments, so that investing outweighs its role as the parent of a trading group.

Yes, and many groups do. The holding company can lend money back to the trading company for working capital, equipment or an acquisition, ideally under a written loan agreement. If the loan is secured by a properly registered charge, the holding company can rank as a secured creditor if the trade ever fails, rather than as an unsecured one. Interest, if charged, is taxable in the holding company and usually deductible in the trading company.

It can be part of the answer. An employer pension contribution is usually deductible for the company, is not taxed on you as income and moves money outside the business altogether. But it is limited by your annual allowance, normally £60,000, and the money is locked away until pension age. From April 2027 most unused pension funds come into your estate for inheritance tax. Many owners use both: pensions up to the allowance, the holding company for the rest.

Yes, and this is one of the main reasons to build it up. A holding company with cash can buy the shares of another company, or start a new subsidiary, without the money first being paid out to you as a taxed dividend. Buying or starting another trading business also tends to support trading-group status, because the cash is put to work in trading activities rather than sitting as an investment.

There is no statutory figure. The trading company should keep enough to pay its creditors, wages, VAT and corporation tax, fund planned capital spending and survive a reasonable downturn, based on a realistic cash forecast. Anything above that is surplus that can be moved up. Your accountant or finance team will usually know the business's seasonal swings, and a documented forecast also supports the directors' decision to pay the dividend.

Earmarking helps, but only if it is genuine. HMRC looks at whether funds are held to meet the trade's cash-flow needs, whether they are earmarked for trade purposes, the nature of any investments and how actively they are managed. Board minutes and plans showing cash set aside for, say, new premises, an acquisition or a major contract are useful evidence. A vague intention to use the money someday is unlikely to persuade HMRC.

Usually not. A passive holding company, which is ignored when counting associated companies, must have no assets other than shares in its subsidiaries and no income other than dividends, which it pays on to shareholders. Holding cash, investments or earning interest breaks those conditions. Once the holding company counts as associated, each company's 19% and 25% corporation tax limits are divided by the number of companies in the group.

If you sell the holding company shares, the cash is part of what the buyer pays for, and buyers often prefer not to pay full value for surplus cash. A large cash pile can also put Business Asset Disposal Relief at risk on the sale. Owners often plan ahead: use the cash for pensions, pay it out over several years at lower dividend rates, or separate it into a different company before a sale, which needs careful timing and advice.

Not necessarily. A sister investment company is any company, owned by the same shareholders, that holds investments outside the trading group. A family investment company is a particular design, usually with different share classes so parents keep control while children own the growth, aimed at passing wealth on. A sister company can be set up as a family investment company, but it doesn't have to be, and the tax issues overlap only partly.

It depends mainly on what you want to do with the money. If you want to reinvest, the holding company selling the trading company under the substantial shareholding exemption usually leaves more working capital, because no corporation tax is due and nothing is taxed on you until cash is paid out. If you want the cash personally, selling the holding company's shares, with capital gains tax at 18% and 24% and possibly Business Asset Disposal Relief, is often simpler and cheaper.

Usually the share sale of the holding company itself. Capital gains tax for 2026/27 is 18% on gains covered by Business Asset Disposal Relief, up to £1m per person, and 18% or 24% on the rest. If the holding company sells the subsidiary instead and then pays the proceeds out as dividends, the top dividend rate is 39.35%. Winding up the holding company can produce capital treatment, but anti-avoidance rules need checking first.

Because the gain can be exempt from corporation tax under the substantial shareholding exemption, and the owners can keep the parts of the group they want. Property, surplus cash, investments or a second business can stay in the holding company. The full sale price stays in the group to reinvest, and personal tax is deferred until money is taken out. It suits owners who intend to keep building or investing.

Many buyers prefer to buy just the trading company, because it is cleaner: the property, cash and anything else they do not want stays behind with the seller, and due diligence focuses on one company. Some buyers are happy to buy the holding company, particularly where the group has several trading subsidiaries they want together. The structure is negotiated, so it helps to know your preferred route before heads of terms are agreed.

They go to the buyer with the company, unless they are dealt with before completion. A buyer will usually reflect surplus cash in the price, but may not want property or investments at all. Taking them out before the sale has its own tax costs, and a dividend of surplus cash just before a sale is taxed at dividend rates. Planning this well before the sale gives more options and avoids last-minute compromises.

Not on that sale, because the seller is the company, not you. Business Asset Disposal Relief only applies to disposals by individuals and some trustees. The company's gain is dealt with under the substantial shareholding exemption instead. BADR may come back into play later if the holding company is wound up within three years of ceasing to be the holding company of a trading group, and the two-year conditions were met up to that point.

Possibly. Where a company stops being a trading company or holding company of a trading group, BADR can still apply to a disposal within the following three years, if the usual conditions were met throughout the two years before it stopped. A distribution in a members' voluntary liquidation is a disposal of your shares. The timing, the amount of cash reinvested and the anti-avoidance rule on winding ups all need checking.

Section 396B ITTOIA 2005 can tax a distribution in a winding up as a dividend instead of a capital gain. Broadly, it applies where you had at least a 5% interest in a close company, you or a connected person carry on a similar trade or activity within two years of the distribution, and a main purpose of the winding up is avoiding income tax. Owners who plan to start a similar business soon after a sale should take advice first.

Where part of the price depends on future performance and is paid in cash, the right to the earn-out is usually valued and taxed at completion, with later payments compared against that value. If the earn-out is linked to your continued employment, HMRC may treat it as employment income instead. Earn-outs paid in shares or loan notes of the buyer can sometimes defer the gain. The wording of the sale agreement matters.

Often, yes. Where the buyer issues loan notes as part of the price, the gain on that part can usually be deferred until the notes are repaid, depending on the type of loan note. The catch is that Business Asset Disposal Relief may then not be available when the gain is finally taxed, because the conditions are tested later. Elections can preserve BADR, so the choice should be made with figures in front of you.

This needs separate checking. The substantial shareholding exemption covers the holding company's gain on the shares, but a right to future payments can be a separate asset, and later payments above the value placed on it at completion may be taxed on their own terms. The answer depends on how the earn-out is drafted, so it should be reviewed alongside the sale agreement, not after completion.

Ideally at least a year before the sale, and earlier if you can. For the holding company to sell a subsidiary under the substantial shareholding exemption, it normally needs to have held the shares for 12 months. A holding company inserted before any buyer is in view is also much easier to explain under the main purpose test that now applies to share exchanges, and it gives time to tidy up cash and property.

Not in itself. Finance Act 2026 replaced the old commercial reasons test for share exchanges with a main purpose test for shares issued from 26 November 2025. HMRC's guidance says restructuring so that a later share sale qualifies for a relief is not caught where the relief's conditions are met throughout the relevant period after the restructuring. The closer to a sale it happens, the more carefully the purpose needs to be documented and cleared.

Sometimes, but compare the rates first. A pre-sale dividend is taxed at dividend rates of 10.75%, 35.75% or 39.35% for 2026/27, while a gain on selling the shares may be taxed at 18% with Business Asset Disposal Relief or 24% without. Paying out cash the buyer would otherwise pay for can therefore cost more tax. It can still make sense in some cases, so run the numbers.

It is a formal, solvent winding up. The directors make a statutory declaration of solvency in the five weeks before the shareholders resolve to wind up, a licensed insolvency practitioner is appointed, and the company's assets are paid out to the shareholders. Those distributions are not treated as dividends, so they are usually taxed as capital gains, subject to the winding-up anti-avoidance rule. It is often used after a holding company has sold its last trading subsidiary.

Normally the holding company, as the seller, gives the warranties and any tax indemnity in the sale agreement, although buyers sometimes ask the individual owners to stand behind them. Because the sale proceeds stay in the holding company, a buyer can see there is money available if a claim arises. Claim periods for tax warranties and indemnities are commonly four to seven years, which affects how much cash you may want to keep in reserve.

After selling its trading business, a holding company that mainly holds cash or investments is likely to be a close investment-holding company. That means it cannot use the 19% small profits rate or marginal relief, so its taxable profits, such as interest and gains, are taxed at 25%. Dividends it receives from most shareholdings are generally exempt. It may still be worthwhile, because the full sale price is working for you.

Yes. The £1m lifetime limit is per individual, so a husband and wife who each meet the conditions in their own right can each have up to £1m of gains taxed at 18% under Business Asset Disposal Relief. Each must hold at least 5% and be an officer or employee for the two years before the sale. For 2026/27 the relief saves up to £60,000 each compared with the 24% rate.

Our sale structure calculator compares a sale of your holding company's shares by the shareholders with a sale of the trading subsidiary by the holding company. It uses the 2026/27 capital gains tax, dividend and Business Asset Disposal Relief rates to show the tax on each route and how much cash ends up with you or stays in the company. It is a starting point for a conversation, not advice on your own facts.

Not normally. Where the conditions in section 135 TCGA 1992 are met, the swap is treated as a reorganisation rather than a sale. Your new holding company shares are treated as the same asset as your old trading company shares, so there is no disposal and no capital gains tax at the time of the exchange. The gain is simply deferred until you later sell or give away the holding company shares, subject to the anti-avoidance rule in section 137.

Section 135 applies if one of three cases is met. Case 1: the new company holds, or will hold as a result of the exchange, more than 25% of the old company's ordinary share capital. Case 2: the shares are issued under a general offer to the old company's members, made on a condition that would give the new company control. Case 3: the new company holds, or will hold, the greater part of the voting power. Inserting a holding company over 100% of a trading company usually meets Cases 1 and 3.

Yes. Because section 127 TCGA 1992 treats the original shares and the new holding as the same asset, your holding company shares inherit the base cost of your trading company shares. If you subscribed £100 for your shares in 2010, your holding company shares will also have a base cost of £100. The exchange does not uplift your base cost to today's value, so a later sale of the holding company shares is taxed on the full growth.

Yes. The holding company shares are treated as acquired when, and in the same way as, your original trading company shares were acquired. That matters for business asset disposal relief, where HMRC looks through the exchange when checking the two-year qualifying period, and for inheritance tax business relief, where the period of ownership of the earlier shares counts towards the two-year test. The conditions must still be met by the holding company after the exchange.

Finance Act 2026 replaced the old anti-avoidance test in section 137 TCGA 1992. The old test asked whether the exchange was for bona fide commercial reasons. The new test asks whether the arrangements have a main purpose of reducing or avoiding capital gains tax or corporation tax. If so, HMRC can make just and reasonable adjustments, which can include switching off share exchange relief. It applies to arrangements involving shares issued on or after 26 November 2025.

No. Under the old rules, a shareholder holding 5% or less of the company was protected from the section 137 anti-avoidance rule. Finance Act 2026 removed that protection for shares issued on or after 26 November 2025. Every shareholder in a share exchange is now within the main purpose test, so small and minority shareholders cannot assume they are outside it and should be included in the planning.

Only in narrow circumstances. The old rules continue where the clearance application was made before 26 November 2025, HMRC notified that it was satisfied, and the shares were issued before 26 January 2026 or, if later, within 60 days beginning with the day HMRC notified its decision. If the shares were not issued within that window, the new main purpose test applies and a fresh clearance under the new rules is usually needed.

Not of itself. HMRC's guidance says the rule does not bite where the advantage is simply the deferral that the share exchange rules are designed to give. Protecting cash from trading risk, adding a second business or preparing for succession are commercial aims. The risk lies in what else is planned, such as extracting value as capital or a sale structured to avoid tax. Clearance under section 138 confirms HMRC's view in advance.

For capital gains tax, section 135 does not strictly require a mirror image. For stamp duty share acquisition relief, it effectively does: after the exchange the holding company must have the same share classes, in the same proportions, held by each shareholder in the same proportions as before, or as nearly as may be. In practice most holding company insertions mirror the existing share structure exactly, and changes are made separately.

It's the contract under which the shareholders transfer their trading company shares to the new holding company, and the holding company issues its own shares to them in return. It records who transfers what, how many new shares each shareholder receives, completion steps and any conditions, such as obtaining HMRC clearance first. It's normally prepared by a solicitor, using the steps and share numbers agreed in the tax plan and set out in the clearance application.

Usually not. Merger relief under section 612 of the Companies Act 2006 applies where the issuing company secures at least a 90% equity holding in another company in exchange for its own equity shares. Where it applies, the premium on the new shares doesn't have to be credited to a share premium account, and the holding company can record its investment without that premium. A holding company acquiring 100% of a trading company normally qualifies.

Often not for the exchange itself. Where shareholders receive holding company shares in the same proportions as before, there is no disposal for capital gains tax, so a formal valuation is not usually needed for that purpose. A value may still be needed for other reasons: if shareholdings or classes change, if someone takes cash, or for stamp duty, inheritance tax or employment-related share rules. We'll tell you when a valuation is sensible.

No. What matters is proportions, not absolute numbers. For stamp duty share acquisition relief, each class must make up the same proportion of the holding company's shares as it did of the trading company's, and each shareholder must hold the same proportion of each class, or as nearly as may be. So issuing ten holding company shares for every trading company share can work, as long as the same ratio applies to everyone.

A section 169Q election treats the exchange as a disposal so BADR can be claimed straight away. The cost is that you pay capital gains tax now, at 18% from 6 April 2026, on a gain you haven't received in cash, and you use part of your £1m BADR lifetime limit. It covers all your shares in the exchange. For owner-managers who stay involved as officers or employees, the election usually isn't needed.

It's possible, but it complicates things. If the holding company issues different classes from those in the trading company, stamp duty share acquisition relief is likely to fail, because the share classes and proportions must match. New classes can also raise value-shifting, settlements and main purpose questions. A cleaner route is often to complete a mirror-image exchange first and then reorganise the holding company's shares as a separate, properly considered step.

Cash changes the analysis. The shareholder receiving cash makes a part disposal, and stamp duty share acquisition relief fails because the consideration must consist only of shares. There may also be transactions in securities and main purpose issues. Common alternatives include the trading company buying back the exiting shareholder's shares before the exchange, or the other shareholders buying them, each with its own tax treatment. The order of steps matters.

Section 135 can apply to an exchange for debentures, including loan notes, so capital gains tax can still be deferred. But loan notes are not shares, so stamp duty share acquisition relief is lost. Loan notes issued to shareholders on a holding company insertion can also look like a way of taking value out as capital rather than income, which is exactly what the anti-avoidance rules target. Any loan notes need careful justification.

Yes, once the holding company owns at least 75% of the trading company, and in a typical insertion it owns 100%. From that point they form a capital gains group, so assets can move between them at no gain and no loss, and a group for corporation tax loss relief, provided the profit and asset entitlement tests are also met. They also count as associated companies for the whole of any accounting period in which they are linked, even briefly.

Yes, but employee shareholders need extra thought. Shares acquired by reason of employment are within the employment-related securities rules, and swapping them for holding company shares can bring reporting obligations and, if value shifts, possible income tax charges. Share options, including EMI options, over trading company shares also need attention, because they don't automatically convert into options over holding company shares. We review these before finalising the steps.

The holding company and the trading company become associated companies, so the £50,000 and £250,000 corporation tax limits are each divided by two, unless the holding company is a passive holding company under section 18F CTA 2010. A holding company that holds cash, has its own costs or charges management fees usually isn't passive. For a trading company with profits between £25,000 and £250,000, this can increase the corporation tax bill.

In practice, the holding company as the buyer. Stamp duty is a charge on the stock transfer form, and the transfer can't properly be entered in the trading company's register of members until the form is duly stamped. So the holding company, which wants to be registered as owner, pays the 0.5% and any interest or penalties. A new holding company with no cash may need funds from its new subsidiary to pay it.

Stamp duty on shares is 0.5% of the consideration, rounded up to the nearest £5. On a share-for-share exchange the consideration is the value of the holding company shares issued, which broadly reflects the value of the trading company. So a company worth £8m would face stamp duty of around £40,000 if share acquisition relief were not available. Interest and penalties can be added if the form is sent to HMRC late.

In summary: the holding company acquires the whole of the target's issued share capital; the acquisition is for bona fide commercial reasons and not mainly to avoid tax; the consideration is only new shares issued to the target's shareholders; every shareholder of the target becomes a shareholder of the holding company; the share classes, the proportions of each class and each shareholder's holdings are the same, or as nearly as may be; and there are no disqualifying arrangements.

Treasury shares are dealt with by a specific rule. If, immediately before the acquisition, the trading company or the holding company holds any of its own shares, those shares are treated as cancelled when testing the share capital, same-shareholders and same-proportions conditions. So the company isn't treated as one of its own shareholders. It's still worth tidying up the share register and checking the treasury position before the exchange documents are drafted.

Not any more. Section 77 used to include a condition that the acquiring company had its registered office in the United Kingdom, but that condition was repealed by the Finance Act 2006. The current conditions focus on the consideration being shares only, the share structure mirroring the target's, commercial reasons and the absence of disqualifying arrangements. A non-UK holding company raises plenty of other tax questions, though.

They are arrangements where it is reasonable to assume that a purpose is for a particular person, or a group of people together, to obtain control of the holding company. A typical example is inserting a holding company with a buyer already lined up to acquire it. A person who held at least 25% of the target throughout the three years before the share issue is excluded from this test, so existing long-term owners don't trigger it.

No. Where section 77 share acquisition relief is claimed, the law requires adjudication, which is HMRC's formal decision on what duty, if any, the document attracts. Documents that need adjudication can't go through the same-day service. Instead, the stock transfer forms are sent to HMRC with details of the relief claimed. HMRC aims to deal with most forms within 15 working days, so build that into the completion timetable.

Stock transfer forms should be sent to HMRC within 30 days of being signed and dated. That applies even where you are claiming a relief and no duty will be payable. If the forms are sent late, a penalty and interest may be due if it turns out the relief isn't available. HMRC aims to deal with most forms within 15 working days and suggests allowing 20 working days.

It shouldn't. Under section 17 of the Stamp Act 1891, a person responsible for registering a transfer that is chargeable with duty but not duly stamped can be fined up to £300. For a share exchange claiming section 77 relief, the transfer is only duly stamped once it has been adjudicated. We include the order of these steps in the completion checklist.

Yes. Section 77 requires the consideration to consist only of the issue of shares in the holding company. If any shareholder receives cash, the relief fails for the whole acquisition, not just the cash element, and stamp duty is due at 0.5% on the full consideration. Where a shareholder wants to leave, alternatives such as a buy-back by the trading company before the exchange need to be considered.

Generally not. After the acquisition, the holding company's shares must be of the same classes as the trading company's, the proportion of each class must be the same, and each shareholder must hold the same proportion of each class, or as nearly as may be. Introducing new classes, such as alphabet shares, at the same time as the exchange usually breaks the relief. They are normally introduced in a separate step.

Yes. Section 77 relief needs the consideration to consist only of shares issued by the holding company. Loan notes are debt, not shares, so issuing them as part of the consideration means the relief is not available and stamp duty is charged at 0.5% on the full consideration. Loan notes can also raise transactions in securities issues for income tax, so they need careful thought on a holding company insertion.

That's a classic disqualifying arrangement. If it's reasonable to assume that a purpose of the arrangements is for the buyer to obtain control of the holding company, section 77 relief can be denied, unless the buyer is someone who held at least 25% of the target throughout the previous three years. A pending sale also raises questions under the capital gains tax main purpose test, so timing needs care.

It can. The holding company usually has one or more subscriber shares before the exchange. If those are held by the wrong person or in a different class, the final shareholdings may not mirror the trading company's, which can put the same-proportions conditions at risk. The usual answer is to plan who holds the subscriber shares from the outset, or to deal with them so the final position matches.

Not on the share exchange itself. Stamp duty land tax applies to land, and inserting a holding company only moves shares. The trading company still owns its property, so nothing passes for SDLT purposes. SDLT becomes relevant later, if property is transferred between companies in the group, for example from the trading company to a new property subsidiary, where the companies are connected and market value applies.

SDLT group relief, in Schedule 7 to the Finance Act 2003, can remove the SDLT charge on transfers of land between companies in a 75% group. It isn't available where there are arrangements for consideration to come from outside the group, for the buyer to leave the group, or where the transfer isn't for bona fide commercial reasons. The relief is claimed on the SDLT return rather than through advance clearance.

No. SDLT group relief only applies to transfers between companies in a 75% group. If the holding company owns 60% of the property company, a transfer of premises from the trading company to the property company won't qualify, and because the companies are connected, SDLT is charged on at least the property's market value. If an outside investor is coming in, the order of the property transfer and the share issue matters.

HMRC will assess stamp duty at 0.5% on the consideration, with interest and possibly penalties if the forms were submitted late. Because relief depends on facts at the time the transfer was signed, it usually can't be fixed afterwards by changing shareholdings. You can ask HMRC to reconsider, or appeal, if you think the decision is wrong. Getting the structure right before signing is far cheaper than arguing afterwards.

No. The section 138 and section 701 clearances deal with capital gains tax and income tax. Stamp duty share acquisition relief is decided separately, through adjudication of the stock transfer forms by HMRC's Stamp Taxes team after the exchange. A clean clearance doesn't guarantee stamp duty relief, so the section 77 conditions need checking in their own right before the documents are signed.

The substantial shareholding exemption, usually called SSE, means a company pays no corporation tax on the gain when it sells shares in another company, provided the conditions are met. It sits in Schedule 7AC TCGA 1992. For an owner-managed group, the classic case is a holding company selling a trading subsidiary: the whole gain can be exempt, and the sale proceeds stay in the holding company. SSE does not apply to individuals selling their own shares.

The holding company must have held a substantial shareholding, at least 10%, throughout a continuous 12-month period that began no more than six years before the day of the sale. In practice that means at least a year of ownership before the sale, and the 10% stake does not need to be held right up to the sale, as long as a qualifying 12 months fell within the six-year window.

Yes. SSE only needs a substantial shareholding, which means at least 10% of the subsidiary's ordinary share capital, together with at least 10% of the profits available for distribution and 10% of the assets on a winding up. A holding company with, say, a 40% stake in a trading joint venture can qualify, as long as the 12-month holding period and the trading conditions are also met.

No, not for disposals on or after 1 April 2017. Before then, the selling company also had to be a trading company or a member of a trading group. Finance (No. 2) Act 2017 removed that requirement, so a holding company with large cash balances or an investment portfolio can still sell a trading subsidiary under SSE. What matters now is the 10% holding and the trading status of the company being sold.

The company being sold must be a qualifying company, meaning a trading company or the holding company of a trading group or trading subgroup. It must meet that test throughout the period from the start of the latest qualifying 12-month holding period up to the moment of sale. A trading company is one whose activities do not include, to a substantial extent, activities other than trading, such as holding investments or letting property.

There is no fixed limit in the legislation. HMRC treats more than 20% as substantial and looks at indicators such as non-trading income, the asset base, expenses and staff time, and the company's history. Cash kept to meet the trade's needs is usually fine. HMRC's guidance warns that long-term retention of significant trading profits may amount to an investment activity, so large idle balances in the company being sold need reviewing.

It can, but there is an extra condition. Normally the subsidiary only needs to be trading up to the moment of sale. Where the buyer is connected with the selling company, for example another company controlled by the same family, the subsidiary must also be a trading company or holding company of a trading group immediately after the sale. This stops SSE being used on sales within the same ownership just before the trade stops.

No. SSE is automatic. HMRC's guidance says no claim is required: if the conditions are met, the gain is simply not a chargeable gain. That also means you cannot opt out of it when it would suit you. The corporation tax return still needs to reflect the disposal correctly, and it is sensible to keep a file showing how the 10%, 12-month and trading conditions were met.

No. Because a gain would be exempt, a loss on a disposal that meets the SSE conditions is not an allowable loss. HMRC's guidance confirms this. So if a subsidiary has fallen in value and the holding company expects to sell at a loss, SSE works against you. Where a loss is likely, the conditions should be checked before the sale, because the exemption applies automatically whenever they are met.

Usually, yes. If a subsidiary received an asset from another group company at no gain and no loss within the previous six years, leaving the group can trigger a degrouping charge under section 179 TCGA 1992. Where the subsidiary leaves because its shares are sold, section 179(3D) adds that gain to the seller's sale proceeds for the shares. If SSE applies to the share sale, the degrouping gain is exempt along with it.

Often, yes. A hive-down moves a trade or assets into a new subsidiary, which is then sold. A new company would not normally have a 12-month history, but paragraph 15A of Schedule 7AC can treat the seller as having held the shares while the assets were used in the trade elsewhere in the group. Degrouping charges on the transferred assets are generally added to the share proceeds. SDLT, VAT and employment points also need checking.

Not straight away. The holding company acquires the subsidiary's shares when it is inserted, so it normally needs to hold them for at least 12 months before the sale for SSE to apply. A holding company inserted with a sale already planned also has to pass the main purpose test that Finance Act 2026 introduced for share exchanges. Inserting the holding company well before any sale talks is far simpler.

Not when it reaches you. SSE exempts the holding company's gain, so the proceeds arrive in the company without corporation tax. When the cash is later paid to you as a dividend, it is taxed at 10.75%, 35.75% or 39.35% for 2026/27, after the £500 dividend allowance. Other routes, such as a liquidation, are taxed as capital in many cases but have their own anti-avoidance rules. The tax is deferred, not removed.

Yes. Because no corporation tax is paid on the exempt gain, the full proceeds stay in the holding company and can be used to buy or start another business, invest, or fund property. Be aware that a company mainly holding investments can become a close investment-holding company, which cannot use the small profits rate or marginal relief, so its future profits are taxed at 25%.

Usually not. SSE needs the company being sold to be a trading company or the holding company of a trading group. A subsidiary whose business is letting property is an investment company, not a trading company, so a gain on selling its shares is normally taxed at the main corporation tax rate of 25%. A subsidiary that trades from its own premises is different, because owning property it uses in its trade is part of trading.

Yes, if the subsidiary is the holding company of a trading group or trading subgroup. In that case the trading test is applied to the subgroup's activities taken together, rather than to the intermediate holding company on its own. So a holding company can sell an intermediate company that owns several trading companies under SSE, provided the subgroup as a whole does not carry on non-trading activities to a substantial extent.

Yes. For SSE, a company that is a member of a group is treated as holding any shares held by other companies in the same group. So if two subsidiaries in a group each hold 6% of a trading company, the group is treated as holding 12%, and either can sell with the benefit of the exemption, provided the 12-month and trading conditions are met for the combined holding.

They are special rules, from 1 April 2017, for companies at least 25% owned by qualifying institutional investors such as pension schemes, life assurance businesses, sovereign wealth funds and charities. A holding below 10% can count as substantial if it cost at least £20m, and the gain can be fully or partly exempt even if the company sold is not trading. They rarely apply to owner-managed groups, but can matter where an institutional investor has bought in.

No. SSE only applies to a company's disposal of shares, interests in shares and certain related assets. If the subsidiary sells its trade and assets to a buyer, any gains on those assets are taxed in the subsidiary in the normal way, and getting the cash to the holding company and then to shareholders is a separate step. That is one reason sellers usually prefer a share sale where the buyer will accept it.

There is no dedicated statutory clearance for SSE. HMRC's non-statutory clearance service is not available for tax planning or for questions of fact, and whether a company is trading is largely a question of fact. In practice, the safer approach is a documented review of the holding period and trading status before the sale, which also helps with the buyer's due diligence and the sale agreement.

It sells a trading company: the second trading company if you've added one, otherwise your original trading company. The buyer appears above it and, with a holding company, the cash arrow runs to HoldCo. The tax card describes the substantial shareholding exemption, which needs the company sold to be trading. Selling a property or investment company is a different exercise, because those companies are unlikely to pass the trading test on their own.

'Split it up' shows a demerger, where the shareholders end up owning two holding companies side by side. The Lab keeps the trading companies under HoldCo 1 and moves the investment and property companies under HoldCo 2. If you've only added a second trading company, it splits the two trades instead. It needs a holding company and at least one other company to split; without them it tells you there's nothing to split yet.

Only which steps you've switched on: whether there's a holding company, a second trading company, an investment company or a property company, and which outcome you picked. These are short codes in the page address. There are no figures, names or personal details in the link, because the Lab doesn't ask for any. Anyone who opens the link sees the same diagram and tax points. 'Start again' clears your choices and the address.

Corporation tax limits are shared between companies under common control, whether or not there's a holding company. If you own two or three companies personally, each one's £50,000 and £250,000 limits are divided by the number of companies. The Lab shows this so you can see that adding a holding company over sister companies may change less than you expect. A holding company counts too, unless it's a passive holding company under s18F CTA 2010.

Each card is tagged by the kind of point it makes. 'Benefit' marks something the structure can do for you, such as tax-free dividends up to the holding company or group relief for losses. 'Watch out' flags a cost or risk, such as reduced corporation tax limits or investment activity affecting reliefs. 'Good to know' covers neutral points, such as how a sale or Business Relief works. Every card links to the page that explains the rule in more depth.

Because surplus cash and investments can count against the trading status that BADR, the substantial shareholding exemption and Business Relief depend on. HMRC treat non-trading activity above about 20% as substantial for BADR and SSE, and a group is judged as one business, so moving cash into a subsidiary doesn't take it out of the test. A company mainly holding portfolio investments is also usually a close investment-holding company, paying 25% corporation tax on all its profits.

No. The Structure Lab works without figures, so it shows the rules that apply to the shape you've built rather than amounts. The one number it gives is each company's corporation tax limits after sharing them between associated companies. For figures, use 'Is a holding company worth it?' for the yearly effect of keeping profits in a holding company, the associated companies calculator for corporation tax, and the sale structure comparison for a sale.

Not in the Lab. It assumes the holding company owns all of each subsidiary, and that the same shareholders own the holding company in the same proportions as they owned the trading company. Ownership levels matter: capital gains groups and group relief need 75%, SSE needs at least 10%, and association turns on control. With outside shareholders in a subsidiary, a joint venture or different share classes, the general points may help, but the conditions need checking on your figures.

It shows profits moving from the trading company to the holding company as dividends. Dividends from a UK subsidiary the holding company controls are normally exempt from corporation tax, so cash can leave the trading company's risk without being paid to you. Income tax arises only when the holding company pays dividends to its shareholders, at 10.75%, 35.75% or 39.35% in 2026/27 after the £500 allowance. The arrow is hidden for 'Sell everything' and when 'Split it up' divides the group.

Inserting a holding company means swapping your trading company shares for holding company shares. For shares issued on or after 26 November 2025, the capital gains relief for that exchange is subject to a main purpose test, and the exchange can also raise income tax questions under the transactions in securities rules. One combined application under s138 TCGA 1992 and s701 ITA 2007 asks HMRC to confirm both in advance. HMRC reply within 30 days, so it shapes the timetable.

The Lab treats the property company as a sister company you own personally. Moving premises out of the trading company to it is normally treated as a sale at market value, because the companies are connected, so there can be a chargeable gain in the trading company and SDLT for the property company. Inside a 75% group, the property can usually move at no gain and no loss with SDLT group relief, subject to clawback if a company leaves the group within 3 or 6 years.

It adds a family company, shown as a family investment company (FIC) or a trust, between your family and the rest of the structure. Parents can keep control through voting shares while children hold shares that take future growth. The Lab also shows Business Relief from inheritance tax under the rules from 6 April 2026: 100% relief on the first £2.5m of qualifying business and agricultural property per person and 50% above. The settlements rules, CGT and inheritance tax all shape the design.

With a holding company, the buyer acquires your holding company shares and you pay capital gains tax, with Business Asset Disposal Relief at 18% possible on up to £1m of lifetime gains if, for two years, the group has been trading and you've met the conditions. Without one, you sell each company's shares yourself, all sharing that single £1m limit, and any company that isn't trading won't qualify. If you've added property or investments, the Lab also asks whether a buyer will want them.

Yes, if it fits the Lab's building blocks: one holding company with your trading company and up to one each of a second trading company, an investment company and a property company. Many owner-managed groups look like that. If yours has several layers, more trading subsidiaries, overseas companies or part-owned subsidiaries, build the nearest version and note what's different. The general points still apply, but details such as which companies are associated or in a 75% group need checking.

Yes. Click 'Copy a link to this structure' and paste it into an email or your enquiry. Whoever opens it sees exactly the diagram and points you saw, which is a quick way to show where you are and where you'd like to get to. Add a few lines on profits, values and your timescale, and a Chartered Tax Adviser can review it against your real figures and history. We respond the same working day.

Because the question it answers is how to get surplus cash out of the trading company's risk. Without a holding company, the only way to do that is to pay it to yourself as a dividend and pay income tax on it. You could leave the cash in the trading company instead, but then it stays within reach of the company's creditors and, if it builds up, can weaken the trading status that BADR and Business Relief depend on.

Mostly not. The saving comes from not paying dividend tax on the surplus you don't need, so it's a deferral. If the holding company later pays the cash out to you as dividends, income tax is due then, at the rates in force at the time. The deferral is still valuable: the full amount can be reinvested in the meantime. Some of the gap may never be taxed, depending on how and when the money eventually leaves.

Because a holding company that keeps cash is an associated company of the trading company. Each company's corporation tax limits then halve, from £50,000 and £250,000 to £25,000 and £125,000. With profits between £25,000 and £250,000, the trading company pays more marginal rate tax, or the full 25%, than it would alone. Below £25,000 or above £250,000 the extra corporation tax is nil, because the rate is the same either way.

After. The calculator charges corporation tax on the profit figure you enter and doesn't deduct your salary from it, so enter the taxable profit once your salary and other costs have been paid. The salary box is used only for your personal tax: it fills your personal allowance and tax bands before your dividends are taxed. If you have other income, such as rent or a pension, you can add it to the salary figure.

It's the profit left in the group after corporation tax and after the dividends you take personally. In the holding company version, that cash moves up to the holding company as an exempt dividend, so it's no longer an asset of the trading company and is out of reach of the trading company's creditors. The dividend has to be paid lawfully, out of the trading company's distributable profits, and well before any financial difficulty.

If what you take out each year is equal to or more than the profit left after corporation tax, there's no surplus to keep in a holding company. The calculator then shows £0 and says so. In that case a holding company doesn't help with cash protection, though it may still matter for other plans, such as buying a property, starting a second business or preparing for a sale. Try a lower figure to see where the surplus begins.

It treats your salary as the first slice of your income and puts your dividends on top. The personal allowance of £12,570 is used first, and it's reduced by £1 for every £2 of income above £100,000. The first £500 of dividends is taxed at 0% but still uses up its band. The rest is taxed at 10.75% in the basic rate band, 35.75% above £50,270 and 39.35% above £125,140.

They're measured at different points. The holding company figure is cash still inside the company, before any personal tax. The personal figure is what you'd have left after paying dividend tax on all the profit and setting aside what you need to live on. Much of the difference is income tax you haven't yet paid, which falls due if the holding company later pays the money out to you as dividends.

No. The 'kept after' figures simply multiply one year's surplus by the number of years, with no interest or investment returns. In practice the holding company would pay corporation tax on its interest and investment income, and you'd pay tax on any investment growth held personally. Because more cash stays invested in the company version, growth usually widens the gap, but the calculator leaves it out to keep the comparison clear.

It's built for one shareholder. With two, two sets of allowances and tax bands are available, so the personal tax in the version without a holding company is overstated. To get a feel for each person's dividend tax, you can run it with each shareholder's share of the profit and of what they need, but the corporation tax figures in those runs won't be right, because the company pays tax on its whole profit.

A holding company escapes association only if it's passive under s18F CTA 2010: no assets other than shares in its subsidiaries, no income other than dividends, all those dividends paid on to its shareholders, and no gains or management expenses. A holding company that keeps the surplus cash fails the first and third conditions, so the calculator assumes it's associated and halves the corporation tax limits. That's the realistic case for this comparison.

No. It's set for a shareholder in England, Wales or Northern Ireland. Dividends are taxed at the same rates and bands across the UK, so for a Scottish shareholder with a small salary the dividend figures are close. Scottish rates and bands apply to salary and other non-savings income, which changes the tax on a larger salary and how much of the basic rate band is left for dividends.

It leaves out the costs of setting up the holding company and running it, such as accounts and filings for an extra company, and any tax on its investment income. It also ignores National Insurance on your salary. If the holding company makes management charges to the trading company, VAT and corporation tax on those charges come into play too. Those amounts are usually modest against a large yearly surplus, but they matter at lower profit levels.

Because a group is judged as one business. BADR on a sale of your holding company shares needs a trading group, and HMRC treat non-trading activity above about 20% as substantial. Business Relief from inheritance tax can exclude cash not needed for the business as an excepted asset. Moving cash into the holding company protects it from trading risk, but it doesn't take it out of these tests, so large balances need a plan for how they're used.

Choose the period until you expect something to change, such as a sale, retirement or the next generation taking over. The calculator accepts 1 to 40 years and multiplies one year's figures by that number, assuming steady profits and the same withdrawals each year. It doesn't change rates over time or add investment growth, so for long periods treat the totals as a sense of scale rather than a forecast.

Because several SSE conditions turn on facts that owners often haven't measured, such as the exact percentage held through a period or how much of a company's activity is non-trading. Choosing 'not sure' doesn't count against you. It moves the result to 'Possibly: check first' and adds a note explaining what to check. That's usually more useful than guessing, because one wrong answer can change the verdict and the tax at stake is 25% of the gain.

You'll see it when nothing you've answered rules SSE out, but at least one point needs confirming. That happens if you answer 'not sure' to any condition, or if you say the buyer is connected with the seller, because the trading test then also applies immediately after the sale. The list under 'What to check' sets out each open point. A clear 'no' to any main condition gives 'SSE looks unlikely' instead.

The substantial shareholding exemption is a corporation tax relief, so it only applies when a company sells shares in another company. If you own the shares yourself, the gain is subject to capital gains tax at 18% or 24% in 2026/27, and Business Asset Disposal Relief may reduce the rate to 18% on up to £1m of lifetime gains. The sale structure comparison sets a personal sale against a sale through a holding company.

It multiplies the gain you enter by the 25% main rate of corporation tax. If the verdict is likely, that's the tax SSE would save; if unlikely, it's roughly the tax that could be due. It's a simple guide: it doesn't apply marginal relief for a company with small profits, indexation allowance up to December 2017, or any capital losses the company could set against the gain if SSE doesn't apply.

No. The seller must have held at least 10% throughout a continuous 12-month period beginning no more than six years before the day of the sale. So a company that has already sold down below 10% can still qualify on a later sale, provided an earlier 12-month period of 10% ownership falls within that six-year window. The checker asks this as a single question, so answer 'not sure' if the dates are close.

Things like holding surplus cash beyond the trade's needs, investment portfolios, and property let to outsiders. HMRC look at indicators rather than one percentage: non-trading income, the value of non-trading assets, expenses and staff time, and the company's history. Where none of them suggests non-trading activity above about 20%, HMRC say the case is unlikely to need detailed review. If any indicator is close, answer 'not sure' and measure it properly.

Normally the company sold only has to be trading up to the sale. Where the buyer is connected with the selling company, for example a company under the same control, the company sold must also be a trading company immediately after the sale. The checker flags this as a point to check rather than a failure.

No. The requirement for the selling company itself to be trading, or a member of a trading group, was removed for disposals on or after 1 April 2017. The checker therefore asks only about the company being sold, which must be a trading company or the holding company of a trading group. A holding company that also holds cash or investments can still sell a trading subsidiary under SSE, though its own position matters for other reliefs.

Usually, yes. Where the subsidiary received assets from another group company within the previous six years at no gain and no loss, a degrouping charge can arise when it leaves the group. That charge is added to the selling company's proceeds for the shares, so if SSE applies to the share sale it normally covers the degrouping gain too. The checker mentions this when the result is likely but doesn't calculate it.

The expected sale price less the selling company's base cost in the shares, which is usually what it paid for them or subscribed. If your holding company acquired the shares through a share-for-share exchange, its base cost needs confirming, because it may not be the same as your own. The figure is used only to show the corporation tax at stake, so a reasonable estimate is fine for a first look.

Neither on its own. The selling company needs at least 10% of the ordinary share capital of the company sold, and that holding must also carry at least 10% of the profits available for distribution and 10% of the assets on a winding up. Votes don't come into it. Holdings with unusual rights, such as shares that carry capital but little income, can fail even above 10%, so answer 'not sure' if your share classes differ.

Look at the reason listed under 'Why it may not apply'. Some failures can be fixed with time, such as completing a 12-month holding period or reducing non-trading activity well before a sale. Others point to a different route, such as shareholders selling the holding company instead, which the sale structure comparison sets out. If SSE doesn't apply, the gain is taxed at the company's corporation tax rate and any loss can be allowable.

It depends on timing. The company sold must have been trading from the start of the latest 12-month period used to meet the holding test until the sale, so a subsidiary that began trading recently may not qualify yet. Special rules can help where a trade is moved into a new subsidiary from elsewhere in the group before the sale, known as a hive-down, but the checker doesn't cover them.

Yes. SSE applies to any disposal of shares by a company that meets the conditions, not only a sale of the whole holding. What matters is that at least 10% was held through a 12-month period in the six years before the sale and that the company has been trading. Remember that selling part of a subsidiary can take it out of a 75% group, which can bring degrouping and SDLT clawback charges.

No. Where at least 25% of the selling company's ordinary share capital is held by qualifying institutional investors, such as pension schemes, life assurance businesses, charities or investment trusts, special rules apply. A holding below 10% can count if it cost at least £20m, and the trading condition can be relaxed in full or in part. The checker is built for owner-managed groups, so it doesn't ask about these rules.

It counts every subsidiary you enter, plus the holding company unless you mark it as passive. The £50,000 and £250,000 limits are then divided by that number. So an active holding company with two subsidiaries gives three companies, and each company's limits become £16,667 and £83,333. If you mark the holding company passive, only the two subsidiaries count and the limits are £25,000 and £125,000.

It shows the corporation tax each company would pay if it had no associated companies at all, with the full £50,000 and £250,000 limits. The headline figure is the difference between the group total and that total. If your companies are already sister companies under your personal control, they're associated today, so the 'On its own' figure isn't your current position and the real cost of adding a holding company is smaller than the headline.

Because a company with profits above £250,000 pays the 25% main rate whatever its limits are. Association only costs tax where a company's profit falls below £250,000 and above its reduced lower limit, so that it loses some or all of its small profits rate or marginal relief. If every company in your group makes more than £250,000, or every company is below its reduced lower limit, the extra tax is nil.

Its own taxable profit for the year, such as management charges to the subsidiaries, interest or rent, after its costs. Don't include dividends from its subsidiaries, which are normally exempt from corporation tax. Many holding companies have little or no taxable profit, which is why the box starts at £0. Even with nil profit, an active holding company still counts as an associated company and reduces everyone else's limits.

The holding company drops out of the count and out of the table, so the limits are divided only between the subsidiaries. With one subsidiary, that means it keeps the full £50,000 and £250,000 limits. Passive status under s18F CTA 2010 is narrow, though: the holding company can hold only shares in its subsidiaries, receive only dividends, pay them all on to its shareholders, and have no gains or management expenses.

No. A company that hasn't carried on any trade or business at any time in the accounting period isn't counted as an associated company, so leave it out or remove it. The same applies to a company that was associated for only part of the period and didn't carry on a business during that part. A company with a small amount of activity, such as letting a property or holding investments, does count, even with little profit.

Add them as extra rows using 'Add a subsidiary' and enter their profits. The calculator only has rows for subsidiaries, but association depends on control, so companies you or your connected persons control outside the group count in exactly the same way. The rows are named Company C, Company D and so on. The calculator takes up to six rows plus the holding company.

It's the company's effective corporation tax rate: its tax in the group divided by its profit. A company with profits at or below its reduced lower limit shows 19%, one above its reduced upper limit shows 25%, and one in between shows a rate between the two because of marginal relief. Comparing it with the 'On its own' column shows how far sharing the limits has pushed each company's rate up.

Because its lower limit has been divided. With the calculator's starting figures, three companies are counted, so each company's limits are £16,667 and £83,333. TradeCo B's £60,000 profit is then in the marginal relief band, giving tax of £14,650, an effective rate of about 24.4%. On its own it would pay £12,150. The difference across all three companies, £3,550 a year at those figures, is the headline result.

No. It assumes a 12-month accounting period for every company. For a shorter period, the £50,000 and £250,000 limits are reduced in proportion to the length of the period, before being divided between associated companies. That often happens in the year a holding company is set up or a new subsidiary is formed, so the first year's figures can differ from the calculator's even if the profits are the same.

Yes. A company counts as associated if it's under common control at any time in the accounting period, even for a day, and the limits are divided for the whole period, not pro rata. So buying or forming a company shortly before a year end can reduce every group company's limits for that year. The calculator treats every company you enter as associated for the full year, which matches this rule.

The calculator takes up to six subsidiaries plus the holding company, which covers most owner-managed groups. For a larger group, the rule is the same: divide £50,000 and £250,000 by the number of companies counted. With ten companies, for example, each company's limits are £5,000 and £25,000, so most profitable companies will pay close to 25%. At that size, the main rate is usually the realistic planning assumption.

No. It applies the small profits rate and marginal relief to every company you enter. A company that exists mainly to hold portfolio investments is usually a close investment-holding company, which pays 25% on all its profits whatever its size. If your group includes one, the calculator will understate its tax. A holding company of trading or commercially letting subsidiaries isn't a close investment-holding company.

Only if the holding company meets every condition in s18F CTA 2010 throughout the period. It can't keep cash, own property, lend money, make management charges, have chargeable gains or incur management expenses, and it must pay out at least the dividends it receives. Most holding companies set up to protect cash or hold property fail this, so 'No, it's active' is the safer starting point. Check the detail before relying on passive status.

It uses the statutory formula for the financial year 2026. Tax is first charged at 25%, then reduced by 3/200 of the difference between the company's upper limit and its profit. With the limits divided, that upper limit is lower, so the relief is smaller. It assumes augmented profits equal taxable profits, which is right unless the company receives dividends from companies outside its group.

Because the two headline figures aren't like for like. Route A shows the cash in your hands after capital gains tax. Route B shows your share of the cash left in the holding company, which hasn't yet been taxed on you personally. So route B shows what's available to reinvest, not what you could spend. If you want the money personally, compare route A with the route B dividend figure instead, and talk to us about other ways of extracting it.

If you say your gain qualifies, it taxes gains up to your unused £1m lifetime limit at 18%. Those gains use up any basic rate band you have left first. The rest of the gain is taxed at 18% within any remaining basic rate band and 24% above. The £3,000 annual exempt amount is set against the gain that doesn't get BADR first, because that saves the most tax.

Because from 6 April 2026 the BADR rate is 18%, the same as the lower main rate of capital gains tax. BADR now saves tax only on gains that would otherwise be taxed at 24%, so the most it can save is £60,000 on the full £1m limit. On a large sale, most of the gain is taxed at 24% either way, which is one reason route B can look so different.

Usually what you originally paid for, or subscribed for, your trading company shares. When a holding company is inserted by a share-for-share exchange, the new holding company shares are treated as the same asset as the old ones, so your base cost and acquisition date carry across. For founders who subscribed for a few pounds of shares, that's why the default is £100. Enter your own share of the base cost, not the whole company's.

Because if the substantial shareholding exemption applies, the holding company pays no corporation tax on its gain, so its base cost makes no difference to the result. If SSE doesn't apply, the calculator charges corporation tax at 25% on the sale price less the holding company's base cost in the trading company. That base cost can differ from your own personal base cost, so it needs confirming before you rely on the figure.

It shows what you'd keep if the holding company paid your whole share of the proceeds to you as one dividend in the same tax year as the sale, with your other income. Most of it is taxed at 39.35%, so the figure is usually well below route A. It's there to show that route B isn't a way to take cash personally at low tax. Paying it out over several years, or other routes, can change the answer.

Because whether a liquidation gives capital treatment depends on facts the calculator can't see. A distribution in a winding up is generally treated as capital, which could bring capital gains tax rates instead of dividend rates. But anti-avoidance rules can tax liquidation proceeds as income in some cases, and BADR depends on the holding company's status. That needs looking at on your facts before you choose a route, so the calculator leaves it out.

Enter the sale price for 100% of the trading company and 50 in 'Your share of the group'. The calculator works out your share of the price for route A, and your share of the holding company's cash for route B. Enter your own base cost, your own income and your own BADR history. Each shareholder should run it separately, because the personal tax depends on each person's figures.

Your other taxable income for the tax year of the sale, such as salary, dividends, rent and pension income, before the gain. It decides how much of your basic rate band is left, which sets how much gain is taxed at 18% rather than 24%. It also decides how the route B dividend is taxed. Someone with income above £50,270 has no basic rate band left, so most of the gain is taxed at 24%.

No. It assumes the whole price is paid in cash on completion. Loan notes, earn-outs and deferred payments are taxed differently, and the timing of tax can change: some gains are taxed when the shares are sold even though the cash arrives later, and some can be deferred. Price adjustments, warranties and costs are also left out. If your deal has these features, use the calculator only for the cash part.

Yes. It uses one price for 100% of the trading company in both routes, and assumes your holding company shares are worth the same, because the holding company has nothing else. In practice buyers often prefer one route. Buying the trading company from the holding company leaves behind any cash, property or history in the holding company, while buying the holding company takes on everything in it. That can affect the price.

The substantial shareholding exemption applies when the holding company has held at least 10% of the trading company for 12 months in the six years before the sale and the trading company has been trading throughout. Our SSE checker walks through those conditions. If you're unsure, run the comparison both ways: the difference shows what's riding on SSE, which tells you how much effort to put into confirming it.

Yes. Choose 'Yes' for BADR and enter the gains you've already claimed relief on, including any Entrepreneurs' Relief claimed before April 2020. The calculator reduces your £1m lifetime limit by that amount and gives BADR only on what's left. If you've used the whole £1m, the gain is taxed at 18% and 24% as if BADR didn't apply. Check past tax returns if you're unsure what was claimed.

No. Route B shows the cash in the holding company on the day of the sale. After that, the holding company pays corporation tax on its interest and investment returns, and if it mainly holds investments it can become a close investment-holding company paying 25% on all its profits. Its shares are also unlikely to qualify for Business Relief from inheritance tax once the trade has gone. Income tax arises whenever cash is paid out to you.

Because in route B the holding company is the seller, so corporation tax is charged on the company's whole gain. The calculator then shows your percentage of what's left, and your share of the corporation tax. In route A each shareholder sells their own shares and pays their own capital gains tax, so the calculator starts with your share of the price and your own base cost.

Because 30 days is the latest HMRC can take to give their decision on a complete application, so it's the safe date to plan around. HMRC often reply sooner, and if they do, the share exchange can move forward. Planning for the full period means a board meeting, a bank or a year end doesn't have to move if the reply takes the time allowed. The planner calls the result the earliest date on these assumptions.

If you choose to allow one round, the planner assumes HMRC ask for further information on day 30, the latest they can, and that you reply after one, two or four weeks. HMRC then have a further 30 days from your reply to decide. So allowing for questions with a two-week reply adds 44 days to the timeline. It's a cautious assumption: questions often come sooner, and a quick, complete answer saves time.

Because the application describes the transaction in detail, and it's simpler when the holding company already exists with its name, registered number and share capital set out. The planner shows it incorporated a week before you apply, with the same shareholders and share classes as the trading company. Forming it doesn't move any trading company shares; nothing changes hands until the share exchange, after clearance.

In principle the share exchange can go ahead as soon as the clearance is in hand, as long as it follows the steps described in the application. The planner puts the earliest share exchange on the day after HMRC's decision is due, which leaves a day to read the clearance letter and get the documents signed. In practice, many owners prefer to allow a little longer to arrange signatures and board approvals.

Everything after the decision can move forward. The share exchange can then take place once you have the clearance letter, and the stamp duty and Companies House deadlines run from the actual date of the share exchange and allotment, not from the planner's date. Re-enter your dates, or simply count forward from the real exchange date: 30 days for the stock transfer form and one month for the return of allotment.

Because a clearance under s138 TCGA 1992 has to be obtained before the holding company issues its shares. If the shares are issued first, there's no clearance to rely on and the protection is lost. For shares issued on or after 26 November 2025 the exchange is subject to a main purpose test, so that advance confirmation matters more than it did. The share exchange is therefore planned for after the decision date.

When the shareholders transfer their trading company shares to the holding company, the stock transfer form would normally attract 0.5% stamp duty. Share acquisition relief under s77 FA 1986 can remove it, but only through adjudication: the form is sent to HMRC with details of the relief claimed. The planner shows the date 30 days after the share exchange, the deadline for sending it. Sending it earlier is fine.

SH01 is the return of allotment that a company files at Companies House when it issues new shares. The holding company issues shares to the shareholders in the share exchange, so it must file the return within one month of the allotment. The planner also reminds you to update the trading company's register of people with significant control, because the holding company becomes its direct owner. Other company records need updating at the same time.

Yes. HMRC accept a single application covering several statutory clearances, sent to their Clearance and Counteraction Team. For a holding company insertion that's usually s138 TCGA 1992, which deals with the capital gains main purpose test, and s701 ITA 2007, which deals with the transactions in securities rules for income tax. Each has the same 30-day response period, so the planner shows one timeline for both.

Because a good clearance application takes preparation. We need the shareholdings before and after, recent accounts, a step-by-step description with diagrams, and a clear explanation of why the holding company is being set up. The share structure needs agreeing first, especially if there are different classes. For a typical owner-managed company we prepare it within a week, which is why a whole insertion usually takes 4 to 6 weeks. A family company with several shareholders can take a little longer.

No. It counts calendar days, as the statutory 30-day periods do, and doesn't move dates that fall on a weekend or bank holiday. A share exchange can't usually be signed and processed on a non-working day, so if the earliest date lands on a weekend, plan for the next working day. Around Christmas and Easter, it's worth allowing a few extra days for HMRC's post and your own signatures.

The planner allows for one round, which is the most common pattern where questions are asked. HMRC can ask again, and each time they have 30 days from your reply to decide or to ask for more. If a second round seems likely, for example where the facts are unusual, add roughly the same period again: your reply time plus 30 days. A complete first application is the best way to avoid extra rounds.

Not directly. The planner is built for inserting a holding company by a share-for-share exchange. Demergers and company purchases of own shares need different clearances, extra steps such as capital reductions or shareholder resolutions, and different filings afterwards. They can often go in the same letter to HMRC, but the timetable after clearance is longer. The 30-day decision period is still a useful guide for the first stage.

The planner starts one week from today, but it's usually best to work backwards. If you need the holding company in place by a particular date, such as before an accounting year end, a property purchase or a new venture, try application dates until the earliest share exchange falls comfortably before it. Then build in the questions option for a safer margin, and check that a week of preparation fits before the application.

No. It assumes clearance is given. If HMRC aren't satisfied, the share exchange shouldn't go ahead as planned. You can revisit the plans and the reasons, give HMRC more information, or reapply. For a s138 refusal, or if HMRC don't reply within the time allowed, the applicant can also ask, within 30 days, for the application to be sent to the tribunal. Any of these adds time.

Yes. Where the same people own companies in different proportions, a new or existing company can be made the parent by share-for-share exchanges. The shareholdings usually need to be lined up first. Where the conditions are met, the exchanges are not disposals for capital gains tax. HMRC clearance is normally applied for before any shares are issued.

If the owners hold different proportions in each company, the exchange can change who owns what. That can affect the capital gains position and stamp duty relief, which needs the same proportions before and after. Lining up the shareholdings, and the share classes, first keeps the exchange simple and the clearance application clear.

Group relief lets one company in a group use its trading losses against the profits of another, so the group pays less corporation tax overall. The companies must be in the same group, which needs 75% common ownership. Other conditions apply, and the claim must be made within the time limit. The rules apply to profits and losses of the same period.

Within a capital gains group, assets can generally move between companies on a no gain, no loss basis. That means no tax arises at the time of the transfer. There is a catch. If the company leaves the group within six years while still holding the asset, a degrouping charge can arise. Sale plans should be checked first.

Group relief from stamp duty land tax is available for transfers between companies in a 75% group, if its conditions are met. It can be withdrawn, with tax payable, if the buying company leaves the group within three years while still holding the property. So relief should be checked against any plan to sell.

Holding property in a separate company keeps it away from the risks of trading. If a trading company has a problem, the property is not directly exposed. It can also make a later sale simpler, because a buyer may want the trading company without the property. The rent charged and the tax position of each company need to be set up carefully.

Not every company belongs in a group. Reasons can include different owners, the tax position of the company, or a wish to keep a business separate. Leaving a company outside means it does not share group reliefs. It also affects the corporation tax limits, because companies under common control can be associated with each other.

Yes, if the conditions are met. For sales to an employee ownership trust on or after 26 November 2025, 50% of the gain is chargeable at the time of sale and the rest is relieved and held over. Earlier sales could be free of capital gains tax. The date and the conditions matter, so planning should start early.

They can. Gains on shares acquired by exercising Enterprise Management Incentive options can qualify for the Business Asset Disposal Relief rate if the option was granted at least two years before the sale, and the other conditions are met. The relief is limited to a lifetime amount, and the rate has been changing, so the current figures should be checked.

It depends on the number of companies, the shareholders and the clearances. HMRC must normally reply to a statutory clearance application within 30 days of a complete application. In this case, the work took six weeks from planning to completion, including clearance, which HMRC granted within three days. A group with outside shareholders or different share classes usually needs more preparation.

Yes, and it is often easier to do early. With little trading history and low values, there is less gain to protect, simpler valuations and fewer questions for HMRC. A share-for-share exchange can insert the holding company without a capital gains tax charge if the conditions are met. Doing it before values grow also keeps the clearance application straightforward.

Companies set up at different times often have different numbers of shares. Putting each company on the same share capital, for example 1,000 shares each, makes the exchange simpler to document and the ownership easier to follow. It also reduces the risk of a mismatch in the proportions, which matters for stamp duty relief.

Share-for-share relief under section 135 of the Taxation of Chargeable Gains Act 1992 applies in one case where the company issuing new shares holds, or ends up holding, more than 25% of the ordinary share capital of the company it acquires. Exactly 25% is not enough. Taking 26% put the exchange just over the line, so that it could qualify for the relief.

It is a swap. The shareholders hand over their shares in the existing companies and receive shares in a new holding company in return. Where the conditions are met, section 135 of the Taxation of Chargeable Gains Act 1992 treats the exchange as not being a disposal, so no capital gains tax arises, and the original base cost carries across.

Share acquisition relief under section 77 of the Finance Act 1986 needs the new company's shares to be issued only to the old shareholders, in the same proportions as they held before. If the shareholdings are not mirrored, the relief is not available and stamp duty is normally payable on the transfer.

The step where the holiday-let company took 26% of the holding company's shares did not mirror the existing shareholdings. It changed who owned what, so stamp duty relief was not available. The earlier step, which inserted the holding company, did mirror ownership and qualified for relief. The cost was known and planned for in advance.

Yes. Here, one of the shareholders is a company, which holds a separate class of shares. Dividends paid to it by the holding company can be received without corporation tax if the conditions are met. The company can then keep the profits and use them for investment, rather than the money first being paid to individuals.

It is not a statutory term. We use it to describe a sister company, owned by the same person, that holds investments and also holds shares in the holding company. In this case, it was an existing company that already had a property business and was given a minority holding.

Separate classes let different shareholders take different dividends or rights. Here the holding company's shares were divided into A shares, held by the individuals, and B shares, held by the investment company. The classes can carry different dividend rights, so profits can flow where the owners want. The rights must be drafted carefully.

Clearance confirms HMRC agrees the capital gains treatment and the income tax position before anything is done. For shares issued on or after 26 November 2025 the capital gains test is whether the arrangements have a main purpose of avoiding tax. HMRC must normally reply to a complete application within 30 days.

Not any more. The furnished holiday lettings regime ended on 5 April 2025 for income tax and capital gains tax, and on 31 March 2025 for corporation tax. Holiday lets are now taxed as ordinary property businesses, so the reliefs that depended on the regime, such as Business Asset Disposal Relief, no longer apply in the same way.

A holding company gives the business a structure that can grow. New subsidiaries, including overseas ones, can sit beneath it. Assets can be kept apart from trading risk. Investors and buyers deal with one UK company at the top. Without one, a single trading company often cannot hold other group companies in a clean, tidy way.

Not where the conditions of a share-for-share exchange are met. The shareholder is treated as holding the new shares as the same asset as the old ones, so there is no disposal on the exchange and the original base cost carries over. It is usual to apply for HMRC clearance first to confirm the exchange is not caught by the anti-avoidance rule.

Not where share acquisition relief under section 77 of the Finance Act 1986 applies. The acquisition must meet its conditions, including bona fide commercial reasons, and the shares must be exchanged for shares only, in the same proportions. The relief has to be claimed, and the transfer must be adjudicated by HMRC, so it is not automatic.

A company with a single share is hard to reorganise cleanly. Allotting more shares first, for example taking one share to 100, gives the new holding company a sensible number of shares to issue in exchange. It also makes later changes, such as new share classes or new shareholders, simpler to carry out.

Yes. A holding company can be set up before the overseas companies are added, so long as it is designed to take them. Each overseas company can then sit under the UK holding company. Liabilities stay within each country's company, and a buyer can acquire the whole group by buying one UK holding company.

A buyer can buy the shares in the holding company, or the holding company can sell a subsidiary. If the conditions are met, the substantial shareholding exemption can make a sale of a subsidiary free of corporation tax on the gain. It generally needs a holding of at least 10% for 12 months within the six years before the sale, so timing matters.

For an exchange before 26 November 2025, section 137 of the Taxation of Chargeable Gains Act 1992 asked whether the exchange was for bona fide commercial reasons and not part of arrangements with a main purpose of avoiding tax. For shares issued from that date it is a main purpose test. HMRC must normally reply to a complete application within 30 days.

It often helps. Investors prefer a clear structure with one parent company and group accounts that show the whole business. A holding company also makes it simpler to issue shares to investors or employees at the top, without disturbing the trading company beneath. Your advisers should confirm any investor or lender requirements before you start.

It can be done, but the tax rules on settlements and dividends need care. Income from shares gifted to a spouse can still be taxed on the giver in some cases, and income from a parental settlement for an unmarried minor child is taxed on the parent above a small limit. A separate share class does not remove these risks. Advice should be taken first.

Alphabet shares are separate classes of ordinary shares, often called A, B and C shares. Each class can be paid a different dividend, so different shareholders, such as family members, can receive different amounts. The share rights must be drafted carefully, and the settlements rules need to be considered before dividends are paid.

With one associated company, the extra corporation tax for a trading company is at most £1,875 a year at 2026/27 rates. That maximum applies where the trading company's profits are between £50,000 and £125,000. Below £50,000 the extra cost falls away to nil at £25,000, and above £125,000 it tapers to nil at £250,000. A company with profits over £250,000 pays 25% either way, so a holding company makes no difference to its rate.

On modest amounts, usually 19%. The dividends it receives from its trading subsidiary are normally exempt and don't count towards its augmented profits, so only the interest is taxed. With one associated company the holding company's lower limit is £25,000, so interest of, say, £10,000 is taxed at the small profits rate, costing £1,900. A holding company of trading subsidiaries isn't a close investment-holding company, so it can use that rate.

Probably not. One of the conditions for a passive holding company is that it has no income other than dividends throughout the accounting period. Interest on a bank account is other income, so even a small amount means the holding company fails the test and counts as an associated company. It also needs to have no assets other than shares in its 51% subsidiaries, which a cash balance kept in the holding company would also breach.

Yes. A company is associated with another if, at any time in the accounting period, one controls the other or both are under common control. It counts even if it was associated for only part of the period. So inserting a holding company partway through your trading company's accounting period means the limits for that whole period are divided, unless the holding company meets the passive conditions or carried on no trade or business during the period.

Each associated company has its own limits divided, but the cost falls on whichever company has taxable profits in the marginal band. In most groups that is the trading company, because the holding company's dividend income from its subsidiary is exempt and doesn't count towards its augmented profits. A holding company with no taxable income pays no corporation tax at all. If it has interest or rent, that income is taxed using the divided limits too.

Usually only slightly. Two companies controlled by the same person are already associated with each other, so each already has its limits halved. Adding a holding company that is not passive makes three associated companies, so each company's limits become a third: about £16,667 and £83,333. For two companies each making £100,000, that adds £375 each, or £750 a year in total, compared with the position with a passive holding company.

Not if it is genuinely dormant. An associated company is ignored if it has not carried on any trade or business at any time in the accounting period, or in the part of it during which it was associated. A genuinely dormant company therefore doesn't reduce the limits for the rest of the group. Be careful, though: a company holding investments, owning property or making loans is carrying on a business even if it has no employees, and will count.

Often not. To be passive, a holding company must hold nothing but shares in its subsidiaries, have no income other than dividends, have no management expenses or gains, and pay out to its shareholders at least the dividends it receives. That rules out the most common reason for a holding company: keeping surplus cash away from trading risk. A saving of at most £1,875 a year per company is usually worth less than the protection a holding company that retains cash provides.

No. There is no statutory cash limit. For Business Asset Disposal Relief and the substantial shareholding exemption, the question is whether the company's activities include non-trading activities to a substantial extent. HMRC treat more than 20% as substantial and look at several indicators, including non-trading income, the asset base, expenses and staff time, and the company's history. Cash that the business genuinely needs for working capital or a planned project is not treated as an investment at all.

Not for BADR. Moving cash up by an exempt dividend protects it from the trading company's creditors, but for Business Asset Disposal Relief a holding company must be the holding company of a trading group, and the group's activities are looked at together as if they were one business. Surplus cash in the holding company is still in the group. If it amounts to a substantial non-trading activity, it can affect the group test just as it would inside the trading company.

Yes, in the right circumstances. HMRC accept that short-term lodgement of surplus funds, for example on deposit, can be part of a trade. What matters is whether the money meets the trade's cash-flow needs or is earmarked for trading purposes, what it is invested in, and how actively it is managed. HMRC also say that long-term retention of significant earnings generated from trading may amount to an investment activity. The longer cash sits with no trading purpose, the harder it is to argue.

Usually, yes, though not on the full value. Business Relief has a different test from BADR. The holding company's shares qualify if its business is wholly or mainly being the holding company of trading companies. Cash that is not used in the business, and not required for future use, is an excepted asset, and its value is excluded from relief. So a trading group with surplus cash can still qualify, but with relief on a lower value than the shares are worth.

For inheritance tax, cash is not an excepted asset if it is required at the time of the transfer for future use in the business, and for capital gains reliefs HMRC ask whether funds are earmarked for trading purposes. In Barclays Bank Trust Co v CIR, the Special Commissioner said required implies some imperative that the money will be used on a given project. A general wish to keep reserves is not enough. Board minutes, budgets, quotes and timetables for specific spending, such as new premises, equipment or an acquisition, are the sort of evidence that helps.

It depends on the relief. Business Asset Disposal Relief requires the trading conditions throughout the two years before the sale, so a problem in that window can't simply be cured on the eve of completion. For the substantial shareholding exemption, the subsidiary being sold must be trading from the start of the relevant twelve-month holding period up to the sale. Planning is best done two years or more ahead, when cash can be spent, paid out or separated over time.

Sometimes. A sister company outside the group, owned directly by the shareholders, removes investments from the trading group test, which helps Business Asset Disposal Relief and the substantial shareholding exemption on a later sale. Getting cash or investments there usually means paying a taxed dividend or carrying out a demerger, both of which have costs. Keeping investments in a subsidiary of the holding company protects them from trading risk but leaves them inside the group test.

Trading status usually matters at the point a relief is claimed: on a share sale for Business Asset Disposal Relief, on a subsidiary sale for the substantial shareholding exemption, and on a death or gift for Business Relief. HMRC then look back over the relevant period, which can be two years or more. That is why the history of the group's cash and investments matters, and why it pays to review the position regularly rather than once a sale or succession is already under way.

No. Share-for-share exchange relief still exists and still defers capital gains tax when a new holding company issues shares to acquire your trading company. What changed is the anti-avoidance test that sits behind the relief. Since 26 November 2025, HMRC can counteract the relief if the arrangements have a main purpose of reducing or avoiding capital gains tax or corporation tax. A holding company inserted for genuine reasons, such as protecting cash or adding a second business, is not the target.

Usually the new one. The Finance Act 2026 rules apply to arrangements involving an issue of shares or debentures on or after 26 November 2025. The old bona fide commercial reasons test only continues if a section 138 clearance application was made before 26 November 2025, HMRC confirmed it was satisfied, and the shares were issued before 26 January 2026 or, if later, within 60 days of HMRC's notification. Anything else issued from 26 November 2025 falls under the main purpose test.

No. HMRC's guidance says the new rule does not apply where the only advantage is a deferral of tax that is consistent with the purpose of the share exchange rules. Deferral is the whole point of section 135, so simply not paying capital gains tax on the day you swap your shares for holding company shares is not the kind of advantage the rule attacks. The question is whether extra features have been built in to reduce or avoid tax beyond that deferral.

Not automatically. Under the old rules, a shareholder holding 5% or less of the target company was outside the anti-avoidance test. Finance Act 2026 removed that protection, so small shareholders are now covered by the same main purpose test as everyone else. In practice a minority shareholder who simply exchanges shares on the same terms as the others is unlikely to be caught, but the automatic safe harbour has gone and the arrangements as a whole are what matter.

A section 138 clearance now confirms that HMRC are satisfied the exchange will be made without arrangements to which the new section 137 applies. It covers capital gains only. HMRC's guidance says it confirms their view that there is no main purpose of avoiding tax on chargeable gains. It does not cover income tax, which is why most applications also ask for clearance under section 701 of the Income Tax Act 2007 for transactions in securities. Clearance must be obtained before the shares are issued.

If the main purpose test applies, HMRC can make just and reasonable adjustments to counteract the advantage, which can include disapplying share exchange relief so far as needed, by assessment or by amending an assessment. That is why clearance before the shares are issued matters. A clearance obtained on full and accurate disclosure gives certainty for capital gains purposes. Without one, you rely on your own assessment that the arrangements had no main tax-avoidance purpose, and HMRC could challenge that later.

No. The Finance Act 2026 change was to the capital gains rules in section 137 of the Taxation of Chargeable Gains Act 1992. Stamp duty share acquisition relief under section 77 of the Finance Act 1986 has its own conditions, and it still contains a bona fide commercial reasons test, alongside requirements that the consideration is only shares and that shareholdings mirror the old company. The relief has to be claimed through HMRC's adjudication process, so it is handled as a separate step.

There is no need to wait if your reasons are clear. The legislation is in force, HMRC's Capital Gains Manual already contains guidance and examples on the new test, and the clearance procedure works as before, with HMRC replying within 30 days. Waiting can cost you: the two-year periods for Business Asset Disposal Relief and Business Relief, and the twelve-month holding period for the substantial shareholding exemption, all run from when the structure is in place.

Decide what the holding company is for. Protecting surplus cash, separating property, adding a second business, preparing for a sale and passing shares to the next generation each lead to a different structure and a different order of steps. The purpose also matters for tax: since 26 November 2025 the share exchange rules ask whether the arrangements have a main purpose of reducing capital gains tax or corporation tax, so a clear commercial purpose, written down at the start, is the foundation of the whole project.

You generally can't force the exchange through without a legal mechanism to do so. A share-for-share exchange needs each shareholder to transfer their trading company shares to the new holding company in return for its shares. Stamp duty relief also expects the holding company's shareholdings to mirror the old company's, class by class and in the same proportions. A shareholder who refuses can leave the structure incomplete. Your articles or a shareholders' agreement may contain drag-along or transfer provisions, but these need checking with a solicitor before you rely on them.

Not if the exchange is a mirror image. The holding company issues shares to the same people, in the same classes and proportions, so the same shareholders control the holding company and, through it, the trading company. The directors of the trading company usually stay in place, and the holding company appoints its own board, often the same people. If you want to change control or bring in family at the same time, treat that as a separate step with its own tax analysis.

You can, but it needs particular care. Business Asset Disposal Relief needs its conditions to be met for two years, and HMRC look through a share exchange to the original company's history, but the holding company itself must also meet the conditions after the exchange. The substantial shareholding exemption needs the holding company itself to have held the subsidiary for at least twelve months. A sale already in view must also be disclosed in any clearance application.

It can. Loan agreements, overdraft facilities and debentures often contain change of control or restructuring clauses, and inserting a holding company can technically trigger them even though the same people own the business. Lenders may also want the holding company to give a guarantee. Raising it early avoids a breach and lets the bank's requirements be built into the plan, rather than discovered after the share exchange has completed.

It can. Option schemes are usually written over shares in the trading company, and a share exchange changes what those shares are and who owns them. Depending on the scheme rules, options may need to be exchanged for options over holding company shares, may become exercisable, or may need consent. Tax-advantaged schemes have their own rules about replacement options. Check the scheme documents before the share exchange and include option holders in the plan from the start.

A typical holding company insertion takes 4 to 6 weeks from the first call to the share exchange. The main fixed step is HMRC clearance: HMRC reply within 30 days of an application, or of any further information they ask for. Before that, the plan has to be agreed, the holding company formed and the application drafted. After clearance, the share exchange is completed, Companies House filings are made and the stamp duty relief claim goes to HMRC for adjudication. Bank consents and option schemes can add time if they are not raised early.

Quite possibly. A parent company must prepare group accounts unless an exemption applies, and a parent subject to the small companies regime is exempt. For financial years beginning on or after 6 April 2025, a group is small if it meets two of: aggregate turnover of no more than £15m net, an aggregate balance sheet of no more than £7.5m net, and no more than 50 employees. Each company still files its own accounts and corporation tax return.

On qualifying business property above the £2.5m allowance, Business Relief is 50%, so half the excess value is taxable at the 40% inheritance tax rate. That works out at an effective rate of 20% on the value above £2.5m, assuming the nil-rate band is used elsewhere. For example, holding company shares worth £8m that fully qualify would leave £5.5m above the allowance, of which £2.75m is taxable, giving inheritance tax of £1.1m.

Yes. From 6 April 2026, any unused part of the £2.5m allowance can be transferred to a surviving spouse or civil partner. Where the first death was before 6 April 2026, the whole £2.5m is assumed to be available to transfer. So a married couple can, in effect, shelter up to £5m of qualifying business and agricultural property at 100% between them, either by each owning shares or by the survivor using the transferred allowance.

No. The £2.5m is a single allowance covering the combined value of property qualifying for agricultural property relief and business property relief. If you own farmland and shares in a trading group, both draw on the same £2.5m. Qualifying property above that amount gets relief at 50%. The allowance is due to be increased in line with the consumer prices index from 6 April 2031, so it is fixed in cash terms until then.

It can. The new rules apply to lifetime gifts made on or after 30 October 2024 where the donor dies on or after 6 April 2026 and within seven years of the gift. If you survive seven years, the gift falls out of account for inheritance tax in the usual way. If you don't, the relief on the gift is worked out under the new rules, using your £2.5m allowance. Gifts before 30 October 2024 are not affected in this way.

Yes. The option to pay inheritance tax by equal annual instalments over ten years, interest-free, has been extended to all property that is eligible for agricultural property relief or business property relief. That helps families who would otherwise need to sell shares or extract cash from the group to pay the tax quickly. The tax still has to be paid in full over that period, so instalments are a cash-flow tool rather than a saving, and the family needs a plan for funding each payment.

Because of the gap between the two rates. Cash or investments that have not been used wholly or mainly for the business throughout the last two years, and are not required for future use, are excepted assets. Their value is excluded from Business Relief and is taxed at the full 40% rate. Since April 2026, that matters more: qualifying value above £2.5m is effectively taxed at 20%, while excepted assets are taxed at 40%, so surplus cash in a trading group is particularly expensive.

Trusts have a £2.5m allowance of their own for the combined value of relievable agricultural and business property they hold. For trusts set up before 30 October 2024, the new rules take effect from the trust's next ten-year anniversary on or after 6 April 2026. The rules for trusts created later, and how the allowance is shared where one person sets up several trusts, are detailed, so take advice before settling shares in a trading group on trust.

For some owners, yes, but there is no single answer. A lifetime gift that you survive by seven years falls outside inheritance tax entirely, and capital gains tax on gifts of shares in a trading group can usually be held over. But you give up the shares and their income, and a gift with strings attached may not work. Keeping shares until death keeps control and income with you, and the £2.5m allowance applies then. The family's needs, your age and health, and who will run the business usually decide.

If both companies are in the same 75% capital gains group, for example both owned by a holding company, a transfer of the building is treated as made at no gain and no loss, so no corporation tax on chargeable gains arises at that point. SDLT group relief can also apply between 75% group companies. If the property company is owned by you personally rather than by the holding company, these reliefs don't apply and the transfer is at market value for both.

SDLT group relief is withdrawn if the company that received the property leaves the group within three years of the transfer, or under arrangements made within that period, while it still holds the property. The SDLT is then charged on the property's market value at the time of the transfer and a further return is due within 30 days. A capital gains degrouping charge can also arise if the property company leaves the group within six years.

Usually not on the building. The capital gains degrouping charge applies to the company that leaves the group while holding an asset it acquired from another group member within the previous six years. If the property company keeps the building and stays in the group, and it is the trading company that is sold, the property hasn't left the group. Check the trading company itself for any assets it received intra-group, and the SDLT position, before agreeing the sale.

It should have one, on commercial terms. A lease at a market rent makes the separation real, gives the property company income to service any borrowing, and supports the value of both companies if either is later sold or financed. Within a group, the rent is deductible for the trading company and taxable in the property company, so the overall corporation tax effect is broadly neutral. A buyer of the trading company will usually want a lease anyway.

Not where the property is used by the group's trade. For Business Asset Disposal Relief, a trading group's activities are looked at together, and activities between group members are disregarded. A property company letting premises to a trading company in the same group is treated as part of the group's trading activities rather than as an investment. The picture changes if the property is let to outside tenants, or the trading company is sold and the building is let to the buyer.

Usually not. A statutory demerger under the Corporation Tax Act 2010 requires each subsidiary whose shares are distributed to be a trading company or the holding company of a trading group. A company whose business is holding and letting property is not trading, so it normally can't be demerged that way. Property separations outside the group are usually done by a capital reduction demerger or a liquidation demerger under section 110 of the Insolvency Act 1986, each with its own conditions.

It can. For inheritance tax, when a group contains a company whose business is holding investments, the holding company's shares are normally valued as if that company weren't in the group. But there is an exception where the company's business is wholly or mainly holding land or buildings occupied wholly or mainly by the group's qualifying trading companies. So premises used by your trading company can stay within relief, provided they really are used for the group's trade.

Not without its consent if the property is mortgaged. A commercial mortgage is secured on the building and lent to a specific borrower, so a transfer to another company usually needs the lender's agreement, a new facility or a refinance. Lenders may also ask for cross-guarantees from other group companies, which can weaken the protection from trading risk that you were aiming for. Speak to your lender early, alongside the tax planning.

Yes, if the new business sits in the same group. With a holding company, the trading company can pay a dividend up to the holding company, which is normally exempt from corporation tax, and the holding company can then lend to or subscribe for shares in the new subsidiary. If you own the new company personally instead, the money usually has to come out to you as a taxed dividend first, at up to 39.35% for 2026/27, before you can invest it.

No. Losses can only be surrendered between companies through group relief if they are in the same group for that purpose. That means one is a 75% subsidiary of the other, or both are 75% subsidiaries of the same holding company, with at least 75% of profits and assets on a winding up too. Two companies owned directly by you are not in a group, because an individual can't be the parent. The sister company's losses stay with it, to be carried forward against its own future profits. Owning the new business through a holding company would allow group relief.

Usually, yes, whichever way you own it. Two companies under the same control are associated companies, and the £50,000 and £250,000 limits for the small profits rate and marginal relief are shared between them. That applies whether the new company is a subsidiary of your holding company or a sister you own directly. With one associated company, the extra cost for a company with profits in the marginal band is at most £1,875 a year at 2026/27 rates.

Not usually, if the new business is in its own limited company and the main company hasn't guaranteed its debts. A separate subsidiary or sister company keeps each business's liabilities in its own company. The protection is weakened if the main company gives guarantees, lends heavily to the new business, or the businesses are run as one in practice. Keeping contracts, bank accounts and staff properly separated is as important as the structure itself.

It can. If the partner holds more than 25% of the new company, it is no longer a 75% subsidiary of your holding company, so group relief for losses and no gain, no loss transfers of assets are lost, although the substantial shareholding exemption can still apply as long as the holding company keeps at least 10%. If the partner has a smaller stake, the group benefits remain. Agree the shareholding before forming the company.

Sometimes, for a small venture closely linked to the existing trade. A division avoids a new company, a second set of accounts and associated company rules, and its losses simply reduce the company's profits. But it offers no protection: the new venture's liabilities are the existing company's liabilities. It can't be sold separately as a company with the substantial shareholding exemption without first moving it into a subsidiary, and moving a business later can create tax costs.

Each company's shares can qualify for Business Asset Disposal Relief if the conditions are met for each, including at least 5% and being an officer or employee, for two years before the sale. But the £1m lifetime limit is per person, not per company. Owning two sister companies doesn't give you two limits. Once you have used £1m of qualifying gains, further gains are taxed at the normal rates, which are 18% and 24% for 2026/27.

A subsidiary of a holding company is usually cleaner. If the new business sits under the trading company, the trading company's creditors are exposed to the value of the new subsidiary's shares, and cash moving between the businesses goes through the riskier company. A holding company above both lets each business stand on its own, with profits and funding flowing through the holding company. If you don't have a holding company yet, inserting one first is often the right starting point.

Usually a sale of the subsidiary by the holding company. If the holding company sells a trading subsidiary under the substantial shareholding exemption, there is no corporation tax on the gain, but the cash is in the company and is taxed again when you take it out. If you sell the holding company shares, you pay capital gains tax now, at 18% on up to £1m of gains with Business Asset Disposal Relief and 24% above, but the cash is yours. Reinvesting favours SSE; spending favours a share sale.

As an illustration, if your shares cost £1,000, you are a higher or additional rate taxpayer and you have your full Business Asset Disposal Relief limit, the gain is £2,999,000. The first £1m at 18% costs £180,000. The remaining £1,999,000, less the £3,000 annual exempt amount, is taxed at 24%, which is £479,040. Total capital gains tax is £659,040, leaving about £2.34m. Real figures depend on your base cost, other gains, reliefs already used and transaction costs.

Possibly, through a members' voluntary liquidation, where the distribution is normally treated as capital rather than income. Business Asset Disposal Relief can apply if the conditions were met for two years up to when the company stopped being a trading or holding company, and the distribution comes within three years of that. But an anti-avoidance rule treats a liquidation distribution as income if you carry on a similar trade or activity within two years and a main purpose is avoiding income tax.

It can. The substantial shareholding exemption looks at what the holding company held before the sale, not how much it sells. If the holding company held at least 10% of the subsidiary's ordinary share capital, with matching rights to profits and assets, for a continuous twelve-month period beginning no more than six years before the sale, and the subsidiary was trading throughout the relevant period, a part disposal can be exempt. Later sales of the remaining shares can also qualify within that six-year window.

Usually, yes. Many buyers prefer it. Buying the trading subsidiary directly from the holding company means the buyer doesn't inherit the holding company's history, cash, property or any other businesses it owns. The seller's warranties and indemnities then come from the holding company, which the buyer will want to see has enough assets to stand behind them. That often means agreeing how long the sale proceeds must stay in the holding company.

Not normally. If the subsidiary being sold took an asset from another group company on a no gain, no loss basis within the previous six years, it is treated as having sold and reacquired that asset at market value when it leaves the group. That degrouping gain is added to the holding company's sale proceeds for the shares, so where the substantial shareholding exemption applies to the share sale, it covers the degrouping gain as well.

Not on the same gain, because they apply to different sellers. SSE exempts a company's gain on selling shares in a trading company; BADR reduces an individual's capital gains tax on selling shares in a trading company or a holding company of a trading group. But one exit can involve both: a holding company might sell one subsidiary under SSE and keep the cash, and the shareholders might later sell the holding company itself and claim BADR, subject to its conditions at that time.

Often, yes, unless the cash is reinvested in a trade. Once the trading subsidiary is sold, a holding company sitting on cash or investments is likely to have a business of wholly or mainly holding investments, so its shares stop qualifying for inheritance tax Business Relief. Shares subject to a binding contract for sale also generally stop qualifying from the date of that contract. A sale for cash therefore turns a relieved asset into a taxable one for inheritance tax.

Holding Company by ASWATAX is a specialist service of ASWATAX LTD, a UK tax advisory firm registered in England and Wales. Advice is led personally by Omar Aswat, a Chartered Tax Adviser (CTA), with a Big 4-trained team of ICAEW and ACCA Chartered Accountants and an in-house legal team. The service exists to give owner-managers a team that concentrates on holding companies and group structures, from the first share exchange to an eventual sale or succession.

It's part of ASWATAX. The main practice advises owner-managed businesses and their owners on a wide range of tax matters, and Holding Company by ASWATAX is the part that focuses on holding companies and groups. You get a specialist team for your structure, with the wider firm behind it when your affairs also involve property, a business sale or a demerger.

Our team has more than 15 years' experience and has set up 100+ holding companies. We've worked on more than £250m of businesses restructured, in groups up to £50m, and we've obtained 100% of the HMRC clearances we've applied for, across 50+ applications. That covers single companies taking their first step into a group as well as established groups being reorganised or prepared for sale.

Profitable UK trading companies run by their owners, often making £250k or more a year or worth between £1m and £50m. Many are family businesses or companies with a small number of founding shareholders. The structure questions are much the same whatever the business does: where cash should sit, where property belongs, and how the owners will eventually sell or pass the business on.

Not as our main service. Holding Company by ASWATAX focuses on advice and structuring: the decisions that change how a group is taxed for years to come. Most clients keep their existing accountant for annual accounts, corporation tax returns and payroll, and we work alongside them. When a structure changes, we explain what that means for the annual compliance so nothing is missed.

Holding company work involves several taxes at once and rules that rarely come up in day-to-day practice: share exchange relief and its new main purpose test, clearance applications, stamp duty relief, group rules, and the trading tests for sale and succession reliefs. Many accountants handle annual work very well and bring in a specialist for these one-off, hard-to-reverse decisions.

Advice is led by Omar Aswat, a Chartered Tax Adviser (CTA), the senior professional qualification of the Chartered Institute of Taxation. The wider team is Big 4-trained and includes Chartered Accountants qualified with the ICAEW and the ACCA. That combination matters for group work, which needs both technical tax knowledge and a clear grasp of accounts, reserves and valuations.

Yes, and we prefer to. A restructure needs legal documents, such as share exchange agreements, board minutes and resolutions, and often changes to the articles or a shareholders' agreement. We design the tax side, agree the order of steps with your solicitor and review the documents against the plan. If you don't have a corporate solicitor, we can suggest how to find one.

ASWATAX runs a small number of specialist services. Demerger Tax (demergertax.co.uk) covers splitting companies and groups. Transaction Tax Partners (transactiontaxpartners.co.uk) advises on buying and selling businesses. Property Tax Advisory (propertytaxadvisory.co.uk) works with landlords and property companies. Our main practice is at www.aswatax.co.uk. Each focuses on one kind of work, with the same firm behind it.

Our registered office is at 124 City Road, London EC1V 2NX. We advise owner-managed companies and groups across the UK. Most of our work happens by video call, phone and email, which fits around running a business and around your accountant's and solicitor's timetables. If a face-to-face meeting would help at a key stage, such as a shareholder meeting, ask us.

Holding Company by ASWATAX is a service of ASWATAX LTD, a limited company registered in England and Wales. ASWATAX LTD is registered with the Chartered Institute of Taxation as Chartered Tax Advisers and for the purposes of anti-money laundering legislation. As the money laundering rules require, we'll ask for identity documents for the company and its owners before we start work.

We respond the same working day. Restructures often have a date behind them, such as a year end, an investment round or a buyer's timetable. Tell us the date that matters when you get in touch and we'll plan around it, from the first call through clearance and implementation to the final filings.

No honest adviser can promise that before looking at the facts. A holding company often helps, but sometimes it adds cost and complexity for little benefit, or the timing is wrong. Our job is to show you what each option means in practice, including the costs of running a group, and to recommend what fits your plans, even if that's leaving things as they are.

It means a Chartered Tax Adviser is responsible for the advice you receive: the analysis, the recommendation and the clearance applications. Omar Aswat CTA leads every holding company engagement personally. The wider team helps with information gathering, modelling and drafting, but the tax judgement on your structure comes from him. You deal with the same adviser from the first call to the final step, rather than being handed between departments.

Yes. Holding company decisions affect shareholders personally, through how they're taxed on dividends, on a sale and on death. We advise owners and their families on those personal consequences as part of the work, and can work with their wealth manager or financial planner. Where shareholders' interests differ, we'll say when separate advice would be sensible.

Because the decisions involved are some of the most valuable, and least reversible, that a company owner makes. Getting the structure right early can protect cash, make room for new ventures, and keep sale and succession reliefs available. Getting it wrong can be expensive to unwind. Concentrating on this work means we see the same issues often and know where the traps are.

So the adviser you speak to is prepared. Knowing roughly who owns the company, what it's worth, what you want to do and when lets the first call focus on your options rather than background questions. It also helps us tell you quickly whether we're the right fit, so neither of us wastes time. You can skip the optional questions and add detail on the call.

About two minutes. There are three short steps: a little about you and what you'd like to do, a little about your company, and how to reach you. You don't need any documents to complete it. If you'd rather not use a form, email taxadvisory@aswatax.co.uk or phone +44 7537 143695 instead, and we'll respond the same working day.

A band is enough to show the scale of what's involved. Value affects which points matter most, for example how much a sale-related relief is worth or whether inheritance tax is a real concern. Few owners have an up-to-date valuation when they first get in touch, and you don't need one. Choose 'Not sure' if you have no idea yet.

Please still get in touch. A holding company can make sense for a smaller business that is generating surplus cash or planning a second venture, and setting the structure up early is often simpler than doing it later. We'll be honest about whether a change is worth the cost and effort. Sometimes the best advice is to wait until the numbers justify it.

Yes. Choose the value band that fits and use the brief description box to mention anything unusual, such as several share classes, shareholders who live abroad, a property company, or a family trust. The adviser will use that to prepare. Our team has worked with groups up to £50m, and more complex cases simply mean a longer first conversation.

The latest accounts are the most useful thing, along with a list of who owns the shares and in what proportions. It also helps to know roughly how much cash the company holds, whether it owns its premises, and any plans for a sale, investment or new venture. Estimates are fine at this stage. We'll ask for precise figures later if they're needed.

Where it looks like a fit, you can usually choose a time for a call straight away. Otherwise, we respond the same working day to arrange one. Either way, the call is free and with Omar Aswat CTA, who leads the work on your structure, not a sales team. You'll see a confirmation on screen so you know your enquiry has arrived.

We respond the same working day during normal UK business hours, Monday to Friday. If you submit the form in the evening or at the weekend, we'll reply on the next working day, or you may be able to choose a call time straight away. If something is pressing, such as a buyer's deadline or an investment round, say so on the form.

No. The first call is free, and it's about understanding your company and whether there's planning worth doing. If there is, we'll confirm the fee within 1 working day and set out in writing what we'd do and what we'd need from you, so you can decide in your own time. Plenty of owners take a few weeks to think it over, or discuss it with their accountant first.

Usually your goals first: protecting cash, buying property, adding a company, selling, or passing the business on. Then how the company is owned and run today, and any dates that matter. The adviser will outline which structures look worth exploring and the main tax points for each, including any HMRC clearances. It's a conversation, not formal written advice.

Yes, if you'd like to. We work on a single fee for the whole restructure, agreed in writing before any work starts, and we confirm your exact fee within 1 working day of you telling us about your structure. Fees are exclusive of VAT and can be paid in full or over 2 monthly instalments. There are three packages, Essential, Premium and No Risk, all quoted on request.

Yes, and it often helps. A holding company usually affects every shareholder, because they all exchange their shares, so it's useful for everyone to hear the same explanation at the same time. Your accountant or solicitor is welcome too. Just mention who'll be joining when you book, and we'll make sure the call is long enough.

Yes. Choose 'Accountant, solicitor or other adviser' on the form and say whether you'd like us to speak to you first or to your client directly. We advise only on the tax structure, so we won't compete for your client's accounts, legal or investment work. You can describe the client in general terms at first if you prefer.

If a change is on your mind, yes. Some decisions are easier at a natural break, such as the start of a new accounting period, and dividend timing often matters around the year end and the start of the tax year. Booking a few months ahead gives time to model the options and, if needed, apply for HMRC clearance before anything happens.

It's used only to respond to your enquiry and prepare for the call. The first conversation is confidential, so you can explain your situation openly, and the company name is optional. Our privacy policy explains how we handle personal data and which service providers help us run the website. You can leave out anything you'd rather explain on the call.

Yes. Choose 'Already done, need help with the follow-up' on the form. If shares have already been exchanged or transferred, there may be follow-up steps such as stamp duty adjudication, Companies House filings or tax return disclosures. We'll review what's been done, check for any exposure and tell you what still needs to happen, and by when.

That's fine, and it's common. Choose 'Something else, or not sure' and tell us in a sentence what's on your mind, such as a growing cash balance or a question from your accountant. The first call is a good place to work out whether a holding company is the right tool at all, or whether something simpler would do the job.

Yes. Every case study we publish describes real work for a real client, anonymised so the business and the people involved can't be identified. We won't publish invented or composite examples presented as genuine. Where an article elsewhere on the site uses a worked example to explain a rule, it is clearly labelled as illustrative and isn't presented as a client story.

We remove names, locations and anything else that could identify the business, and round or describe figures in ranges where exact numbers might give it away. We may describe the sector in general terms, such as a manufacturing or professional services company. The client reads the draft and must approve it before publication, and can ask for any detail to be changed or removed.

No. Nothing about your company, your shareholders or the work we've done is published without your written agreement. Most clients never appear in a case study at all, and that's entirely fine. If you do agree, you'll see and approve the final wording first, and you can ask us to take a case study down later if your circumstances change.

Each one follows the same shape: what the owners wanted to achieve, how the company or group was set up at the start, the options we compared, why one was chosen, how it was implemented and what the outcome was. Typical subjects include inserting a holding company, separating property, protecting cash, selling a subsidiary and preparing a group for sale or succession.

On a first call we can talk you through how we've approached similar situations, in general terms and without identifying anyone. That's often more useful than a written case study, because we can focus on the points that matter for your company. We can also explain what a typical step plan and clearance timeline looks like for the kind of change you're considering.

Sometimes. Our clients' affairs are confidential, so we never share their details without permission. Where a client has said they're happy to talk to people considering similar work, we can ask whether they'd be willing to speak to you. That isn't always possible, and we'll be honest if it isn't, but ask us on the first call if it would help.

Our team has more than 15 years' experience, has set up 100+ holding companies and has worked on more than £250m of businesses restructured, in groups up to £50m. We've obtained 100% of the HMRC clearances we've applied for, across 50+ applications. Advice is led personally by Omar Aswat, a Chartered Tax Adviser (CTA), with a Big 4-trained team including ICAEW and ACCA Chartered Accountants.

Where the client agrees and it's meaningful, a case study may describe the effect of the planning in broad terms. We're careful with headline savings, because they depend on assumptions about future profits, dividends and sale values that may not happen. We'd rather explain what changed and why, so readers can judge whether something similar might apply to them.

Possibly, if the situation is one other owner-managers would recognise, such as a holding company inserted ahead of a second venture or property moved out of a trading company. We only raise it once the work is finished and only if the client seems comfortable. Saying no makes no difference at all to how we work with you.

Yes. Accountants, solicitors and other advisers are welcome to share links with their clients. An introducer can also describe a client's situation to us in general terms, without names, and we'll give an initial view on how we would approach it, including whether HMRC clearance is likely to be needed and roughly how long the work would take.

Each one describes real work, approved by the client, and sets out the trade-offs as well as the result, including options we looked at and rejected and any costs or conditions that came with the chosen route. Where a relief depended on conditions continuing to be met after the restructure, we'll say so. If something didn't go to plan, we'd rather explain how it was handled.

Yes, where it helps readers understand the work. A case study might explain that a share-for-share exchange was carried out with HMRC clearance, that stamp duty relief was claimed, or that a later sale of a subsidiary qualified for the substantial shareholding exemption. It will link to the relevant service page so you can read how each one works.

As clients agree to them, so there's no fixed timetable. A typical holding company insertion takes 4 to 6 weeks, but some outcomes, such as a later sale, take longer still, so a case study may follow some time after the work. Each one will show the date it was published and the tax year the work related to, because the rules change over time.

Sometimes. ASWATAX's other specialist services, such as Demerger Tax for splitting groups, Transaction Tax Partners for business sales and Property Tax Advisory for property companies, often involve holding company structures too. Where a published example from one of those sites is relevant here, we may link to it so you can read it in context.

The quickest route is the Book a call form, which takes about two minutes and asks what the adviser needs to know about your company or group. You can also email taxadvisory@aswatax.co.uk, or call or WhatsApp +44 7537 143695. However you contact us, your enquiry goes straight to a senior adviser, not a call centre, and we respond the same working day.

Yes. You can message or call us on WhatsApp at +44 7537 143695. Many business owners find it easier to send a short note between meetings, for example to say what the company does, roughly what it's worth and what's prompting the question. We respond the same working day and can then arrange a proper call at a time that suits you.

We respond the same working day. If you use the Book a call form and it looks like a fit, you can often choose a time to talk straight away rather than waiting for a reply. Messages sent in the evening or at a weekend get a reply on the next working day. If there's a date driving things, such as a buyer's timetable or a year end, mention it.

A senior adviser reads it and arranges a first call. On that call we'll ask who owns the company, what it does, roughly what it's worth, what cash or property it holds and what you want to achieve. We'll then tell you which options look worth exploring, what the main tax points are and whether we're the right people to help. If you'd like to go ahead, we confirm your exact fee within 1 working day.

A rough picture is enough to start: who owns the shares and in what proportions, what the company does, approximate profits and value, any surplus cash or property, and what you're hoping to do, such as protect cash, start a second business or prepare for a sale. The latest accounts are useful but not essential. Precise figures can follow once we know what's worth modelling.

Yes. Email taxadvisory@aswatax.co.uk with a short description of your company, what you'd like to achieve and the best way to reach you. The form can be quicker because it asks the right questions up front, but a short email works just as well. We'll reply the same working day and suggest a time to talk.

Yes. Accountants, solicitors, corporate finance advisers and wealth managers often get in touch for a client, by form, email or phone. We focus on holding company and group tax advice, so we won't take over your annual accounts, legal work or investment advice, and the relationship stays with the adviser who introduced you. They're welcome to join the first call as well.

Yes. Owners often share sensitive information with us, such as an approach from a buyer, a disagreement between shareholders, family plans or worries about past decisions. What you tell us is used only to respond to you and advise you, and nothing is shared without your agreement. You can describe your situation in general terms first if you'd prefer.

A tax adviser. The person you speak to is the person who would work on your structure, so the first conversation can get into the detail straight away. Advice is led personally by Omar Aswat, a Chartered Tax Adviser (CTA), backed by a Big 4-trained team that includes ICAEW and ACCA Chartered Accountants. You won't be passed to someone else once the work starts.

Ideally, yes. Some of the most useful planning has to happen before heads of terms are signed, because restructuring with a sale already in view can change how HMRC looks at it. Getting in touch early leaves more options open and gives time for any clearance applications. If talks have already started, contact us anyway and tell us where things stand.

Yes. We advise shareholders who live abroad as well as UK residents, and the Book a call form asks whether any shareholders are outside the UK. Residence can change how a share exchange, a sale or a dividend is taxed, so it's important to mention it early. Calls can be arranged around your time zone, and WhatsApp is often easiest from overseas.

We work normal UK business hours, Monday to Friday, and respond to enquiries the same working day. Enquiries made in the evening or at the weekend get a reply on the next working day. If something is time-critical, such as a completion date, a board meeting or a deadline for a clearance application, say so in your message and we'll plan around it.

You can, but you don't need to. Helpful documents include the latest accounts, the shareholder list or cap table, any shareholders' agreement and a short note of what you want to achieve. Please don't send anything you'd rather discuss first. After the first call we'll send a specific information list, so you only gather what's relevant to your situation.

Our registered office is at 124 City Road, London EC1V 2NX. Most of our work is done by video call, phone and email, so we advise owner-managed companies and groups right across the UK without anyone needing to travel. If a face-to-face meeting would help at a particular stage, such as a family or shareholder meeting, let us know.

Yes. If we're already advising you, contact the adviser working on your structure directly, or use taxadvisory@aswatax.co.uk or +44 7537 143695 and mention your company name. Messages about live work are picked up the same working day. If something has changed, such as a new buyer, a new shareholder or a revised timetable, tell us straight away.

Yes. We work on a single fee for the whole restructure, agreed in writing before any work starts, and we confirm your exact fee within 1 working day of you telling us about your structure. Fees are exclusive of VAT and can be paid in full or over 2 monthly instalments. We offer three packages, Essential, Premium and No Risk, all quoted on request. The first call is free.

No. Most people contact us with a goal rather than a technical question, such as keeping cash safe from trading risk, buying a building or getting ready to sell. Working out which reliefs, clearances and structures fit that goal is our job. Just describe what you want to achieve and roughly how the company is owned, and we'll take it from there.

No. Holding Company by ASWATAX gives holding company and group tax advice and helps implement it. We don't take over annual accounts and returns as a matter of course, draft legal documents, run sale processes or give investment advice. Your client stays your client, and we'll send them back to you for everything outside the tax work we've been asked to do.

When a client's question goes beyond the annual cycle: inserting a holding company, moving cash or property within a group, adding a second company, a share sale or subsidiary sale, splitting shareholders, or succession. These decisions usually involve clearance applications and several taxes at once. Many accountants keep the compliance and bring us in for the structuring, then take the group back afterwards.

Solicitors typically prepare the share exchange agreement, resolutions, minutes, articles and any shareholders' agreement, while we design the tax structure, write the clearance application and set the order of steps. We review the documents against the tax plan and confirm when each step can go ahead. That division keeps each adviser in their own lane and avoids documents that don't match the clearance.

Because the structure of the seller often decides how much of the price the owners keep, and some planning has to happen well before heads of terms. A corporate finance adviser may see a client who would benefit from selling a subsidiary rather than the shares, or from tidying up cash or property first. Bringing us in early keeps the deal timetable intact.

Usually clients whose wealth is tied up in a trading company and who want to extract it efficiently, invest surplus cash without putting it at risk from the trade, or plan for the next generation. We can look at holding companies, investment companies within a group, and succession structures, while the wealth manager or IFA continues to advise on investments, pensions and the overall financial plan.

We respond the same working day. An initial view usually comes as a short call setting out the likely options, the main tax issues, whether HMRC clearance will be needed and what we'd need to look at in more detail. That gives you something useful to take back to the client before anyone commits to further work. Once we know the structure, we confirm the fee within 1 working day.

Yes. Send us an outline of the client's structure and what they want to achieve, and we'll confirm the exact fee within 1 working day. We work on a single fee for the whole restructure, agreed in writing before work starts, exclusive of VAT and payable in full or over 2 monthly instalments. There are three packages, Essential, Premium and No Risk, so you can give your client a clear choice.

Yes. We can report through you, join your calls with the client, or work directly with the client and keep you copied in, whichever you prefer. Tell us at the start and we'll stick to it. Our scoping letter covers only the holding company and group tax work agreed, so there's no drift into your area of work.

A short outline is enough: what the company does, who owns it and in what proportions, rough profits and value, any significant cash, property or loans, and what the client wants to achieve. The latest accounts help. If a sale, investment or deadline is in view, tell us the timing. We'll say what else we need if it turns out to be complex.

Yes. You can describe the client in general terms and we'll give you an initial view. Anything you tell us is used only to respond to you. Once the client decides to go ahead, we carry out identity checks with them directly, as the money laundering rules require, and agree the scope in writing with them and, if you wish, with you.

Use the Book a call form and choose 'Accountant, solicitor or other adviser', email taxadvisory@aswatax.co.uk, or call or WhatsApp +44 7537 143695. Let us know whether you want us to report through you or work directly with the client, and roughly what they want to achieve. We respond the same working day.

Advice is led personally by Omar Aswat, a Chartered Tax Adviser (CTA), supported by a Big 4-trained team that includes ICAEW and ACCA Chartered Accountants. Our team has 15+ years' experience, has set up 100+ holding companies and has obtained 100% of the HMRC clearances it has applied for, across 50+ applications. The same senior adviser stays involved from the first call to the final filing.

Mainly profitable owner-managed trading companies, typically making £250k or more a year or worth between £1m and £50m, and groups up to £50m. For smaller companies, we'll be honest about whether a holding company would justify the cost and effort of running a group. Every introduction gets the same senior attention, whatever its size.

A trading company building up surplus cash, an owner wanting to buy property without putting it in the trading company, a second business that needs its own company, a buyer showing interest, shareholders who want to go separate ways, and parents planning to pass the business to children. Each calls for different analysis, and we explain the trade-offs to you and the client.

Yes, but it's better to speak to us before anything moves. If shares have already been exchanged, we'll review what was done, whether clearance was needed, whether stamp duty relief was claimed properly, and whether any later plans, such as a sale, are affected. Some problems can be fixed and some can only be managed, so acting early matters.

Yes. A restructure usually needs the accountant, the solicitor and sometimes a corporate finance adviser or wealth manager working together. We set out a step plan that shows who does what and when, share it with everyone involved and keep it updated. You'll see the same timetable as the client, so there are no surprises about what's happening next.

Yes. When the restructure is complete, we send a handover note covering what changed, what needs to appear in the accounts and tax returns, and any conditions that must continue to be met. The ongoing compliance and the wider relationship stay with you. If the client needs further structuring advice later, such as for a sale, we'll pick it up with you again.

In everyday use, yes. 'Parent company' is the Companies Act term for a company that controls one or more subsidiaries, and it's the phrase you'll see in rules about group accounts. 'Holding company' is the more common business term, and tax law uses it too, for example when defining a holding company of a trading group. Either way, it means a company that owns shares in other companies.

They're shorthand advisers use in diagrams and step plans. HoldCo is the holding company at the top of the group. TradeCo is the company that runs the business. PropCo is a company that owns property, often the premises the business trades from. InvestCo holds investments or surplus cash. They aren't legal names, and on this site each has its own colour: blue, green, brick and amber.

A company whose shares are all owned by another company, its parent. When a holding company is inserted above an existing business through a share-for-share exchange, the original company usually becomes a wholly owned subsidiary of the new holding company. A subsidiary can also be partly owned, with other shareholders alongside the parent, which changes how some tax and accounting rules apply.

Because different reliefs use different ownership tests. Broadly, a 51% subsidiary is one where the parent owns more than half the ordinary share capital, which matters for things like the definition of a holding company for Business Asset Disposal Relief. A 75% test applies to groups for capital gains and loss relief, with extra conditions about profits and assets. Which test applies depends on the relief.

A subsidiary is owned by another company. Sister companies sit side by side, owned directly by the same shareholders, with neither owning the other. The difference matters: dividends can move up from a subsidiary to its holding company, but cash can't move between sister companies so easily, and some group reliefs only apply where one company owns the other.

They're the main tax Acts. TCGA 1992 is the Taxation of Chargeable Gains Act, which covers share exchanges and capital gains. CTA 2009 and CTA 2010 are the Corporation Tax Acts, covering company profits, dividends and groups. ITA 2007 is the Income Tax Act, which includes the transactions in securities rules. IHTA 1984 covers inheritance tax, and FA means a Finance Act.

HMRC publishes its internal guidance online in manuals, such as the Capital Gains Manual (CG), the Company Taxation Manual (CTM) and the Inheritance Tax Manual (IHTM). They explain how HMRC interprets the law. They aren't law themselves, but they show how HMRC is likely to approach a case, so advisers quote them alongside the legislation, for example HMRC's 20% indicator for 'substantial' non-trading activity.

It means the clearance procedure is set out in the legislation itself, with rules about what HMRC must decide and how quickly. The share exchange and transactions in securities clearances are statutory, and HMRC must reply within 30 days of the application or of any further information it asks for. HMRC also runs a separate non-statutory clearance service for other questions.

Broadly, a UK company controlled by five or fewer shareholders, or by any number of shareholders who are also directors. Most owner-managed companies, and the holding companies above them, are close companies. Several rules apply only to close companies, including the tax charge on loans to shareholders and the transactions in securities rules that HMRC considers when you insert a holding company.

Base cost is what is treated as having been paid for an asset when working out a capital gain. For shares you subscribed for, it's usually what you paid, plus certain costs. On a share-for-share exchange that qualifies for relief, your new holding company shares take over the base cost and acquisition date of your original shares, which is why the exchange itself doesn't normally trigger a gain.

The accumulated, realised profits a company can legally pay out as dividends, after losses. A company can only pay a dividend out of distributable reserves, and directors should check there are enough before declaring one. In a group, each company has its own reserves, so profits usually have to move up as dividends from the subsidiary before the holding company can pay them to shareholders.

It's a defined term covering people and companies whose dealings HMRC treats with extra care. Your spouse or civil partner, relatives and their spouses, business partners, trustees of family trusts, and companies you control, alone or with connected people, are generally connected with you. Transactions between connected persons are often treated as taking place at market value, whatever price is actually paid.

A step plan sets out, in order, each action in a restructure: which company is formed, which shares are issued or transferred, which assets move, which dividends are paid and which filings follow. It shows the tax treatment of each step and the documents needed. It's the document that keeps the client, accountant and solicitor working to the same sequence, and it's often attached to a clearance application.

Heads of terms, sometimes called a letter of intent, set out the main commercial points agreed between a buyer and seller before lawyers draft the full sale agreement, such as the price, how it will be paid and the timetable. They're usually not legally binding, apart from points like confidentiality and exclusivity. Tax planning ideally happens before they're signed.

A cap table, short for capitalisation table, lists who owns the shares in a company: each shareholder, how many shares they hold, of which class, and their percentage. In a group, there's usually one for the holding company and simple ones for each subsidiary. It's one of the first documents we ask for, because ownership drives almost every tax answer in a restructure.

Use the search box at the top of the list, or browse alphabetically. Each entry gives a short plain-English definition and, where it helps, a link to the page that explains the topic in more depth. Abbreviations are listed under the letters themselves, so look for SSE or BADR rather than the full name. If a term is missing, ask us and we'll consider adding it.

Not exactly. The glossary gives plain-English explanations so owner-managers can follow the conversation. Legal definitions are often longer, with conditions and exceptions that matter in particular cases. Where the precise wording affects the outcome, such as what counts as a trading company or a substantial shareholding, we'll work from the legislation itself when we advise you.

There are six. You get in touch and we respond the same working day. We have a free first call to understand your company and goals. We send a scoping letter setting out what we'll do and the fee. We gather information, analyse the options and give you a written recommendation. Where needed, we apply to HMRC for clearance. Then we implement the plan alongside your accountant and solicitor.

A scoping letter, sometimes called an engagement letter, confirms in writing what we've agreed to do, what's included, what we need from you, who else is involved, the agreed fee and the expected timetable. It's sent before any work starts, so everyone knows where they stand. If the scope needs to change later, for example because a buyer appears, we update it with you first.

We listen first: what the company does, who owns it, what's prompting the question and what you'd like the structure to achieve. Then we ask about cash, property, borrowing, shareholders and any dates that matter. By the end, we'll outline the options worth exploring, the main tax points for each, whether clearance is likely to be needed and what further work would involve.

A typical holding company insertion takes 4 to 6 weeks from the first call to the share exchange. HMRC's 30-day clearance window is the main part of that, so we prepare the analysis and the clearance application promptly once we start. Stamp duty adjudication and the Companies House filings follow the share exchange. Larger restructures, or those with property moving between companies, take longer.

Because it gives certainty before the shares are issued. A clearance confirms HMRC accepts that the anti-avoidance rules shouldn't apply to the arrangements as described. Once shares have been exchanged, the transaction can't easily be unwound, so it's better to know HMRC's view first. Applications for the capital gains and income tax clearances are usually made together in one letter.

We do. The application sets out the companies, the shareholders, the steps in order, the commercial reasons for the restructure and the provisions under which clearance is sought, usually with a structure diagram. It's sent to HMRC's Clearance and Counteraction Team. We review it with you before it goes, because it must give a full and accurate picture to be relied on.

HMRC can ask for further information within 30 days of the application, and then has 30 days from receiving the answers to make its decision. We prepare the response with you and send it promptly. Questions usually concern the commercial reasons for the restructure or what will happen afterwards. A clear, complete application in the first place makes follow-up questions less likely.

We agree at the start who does what. Typically we design the tax structure and the step plan, handle the clearance applications and review each document against the plan. Your solicitor prepares the legal documents, such as the share exchange agreement and resolutions. Your accountant updates the books and handles the annual compliance. We keep everyone working from the same timetable.

Yes. Our recommendations are set out in writing, with the reasoning behind them and the main conditions and risks explained in plain English. That gives you something to share with fellow shareholders, your accountant and your solicitor, and a record of why each decision was made. Key points agreed on calls are confirmed by email so nothing relies on memory.

Omar Aswat, a Chartered Tax Adviser (CTA), leads every holding company engagement personally, from the first call to the final filing. He's supported by a Big 4-trained team of ICAEW and ACCA Chartered Accountants and an in-house legal team. You won't be passed to a junior team or between departments, so you won't need to explain your company and your plans twice.

Usually the last two or three years' accounts, the shareholder register, the articles of association, any shareholders' agreement, details of property and significant assets, loans to or from shareholders, and your plans for the next few years. Where a sale is in view, we'll ask what stage talks have reached. After the first call we send a specific list, so you only gather what's relevant.

We respond the same working day, throughout the work. We plan around the dates that matter to you, such as a year end, a board meeting or a buyer's timetable. If something changes or an urgent question comes up, for example from a lender or a buyer's lawyers, tell us and we'll prioritise it.

We help with the follow-through: stamp duty adjudication on the share transfer, Companies House filings, what needs to appear on tax returns, and any conditions that must keep being met. We'll point out ongoing points, such as how the group's corporation tax limits change and how dividends should move. Your accountant then carries on with the annual compliance, with a clear handover note.

Yes. Many owners start with a review of their current position: how the company or group is taxed today, what the main options are and what each would involve. You can then decide whether to go further. Sometimes the review is all that's needed, because the answer is to keep things as they are or wait until the numbers justify a change.

Most of our work happens by video call, phone and email, which suits owner-managers across the UK and fits around running a business. Some clients like to meet at a key stage, such as when all the shareholders need to agree a plan or when the next generation is joining the conversation. Ask if an in-person meeting would help.

Three things mostly. Share the information we ask for promptly, so the analysis reflects your real position. Tell us straight away if anything changes, such as a new shareholder, a buyer's approach, a large dividend or a property purchase. And don't issue or transfer shares, move assets or sign documents until we've confirmed it's time, because the order of the steps matters.

We charge one fee for the whole restructure, agreed in writing before any work starts, so you know the cost before you commit. Fees are exclusive of VAT, and you can pay in full or over 2 monthly instalments. There are three packages, Essential, Premium and No Risk, each quoted on request once we understand your company. The first call is free, and you don't commit to anything by having it.

Within 1 working day of you telling us about your structure. We need the basics: who owns the shares, what the company or group looks like, what you want to achieve and any dates that matter. The Book a call form or a free first call is usually enough. We then confirm the exact fee for the package that suits you, in writing, and it covers the whole restructure.

The No Risk package includes a money-back guarantee if HMRC clearance is not obtained, full HMRC enquiry defence at no extra charge, and 6 months of tax support after completion. It suits owners who want certainty about the outcome as well as the cost. Like the Essential and Premium packages, it's quoted on request as a single fee, agreed in writing before work starts and payable in full or over 2 monthly instalments.

Owner-managers of UK trading companies, their families, and the accountants, solicitors and corporate finance advisers who work with them. Each article takes one practical question, such as what changes when a holding company is inserted or how a sale through a group works, and explains the tax in plain English. They assume you know your business well but not the tax rules.

The articles are written by our team and reviewed by Omar Aswat, a Chartered Tax Adviser (CTA), before they're published. They draw on the legislation, HMRC's published manuals and our experience of setting up and restructuring holding companies. Every article shows the date it was last reviewed so you can judge how current it is.

We add articles as questions come up in our work and as the rules change, rather than to a fixed timetable. Changes such as the Finance Act 2026 reforms to share exchanges and to Business Relief are covered when they happen. Existing articles are reviewed and updated too, and the review date at the top of each one shows when that last happened.

Use the articles to understand the issues and prepare better questions, not as advice for your situation. Each one explains how the rules generally work, but the right answer for your company depends on its history, its shareholders and your plans. Before you issue shares, move assets, pay a large dividend or agree a sale, take advice on your own facts.

Into four topic hubs that follow the life of a company: setting up a holding company, running a group, selling and exits, and succession and family. Each hub has a short introduction, links to the main service pages on that subject and answers to the common questions. Within each hub, articles are listed with the newest first.

A service page, such as the one on the substantial shareholding exemption, gives the full picture of a subject and explains how we help. An insights article usually goes deeper into one narrower question, a recent change in the rules, or a common mistake. The two link to each other, so you can move from a quick read to the broader explanation and back.

Yes. Articles are written for the current tax year, 2026/27, and reviewed when Budgets, Finance Acts or HMRC guidance change something relevant. Where a change has a start date, such as the main purpose test for share exchanges issued on or after 26 November 2025, we say which transactions it affects. Older rules are only described where they still matter for past transactions.

Yes, please do. Many of our articles start with a question a client, accountant or solicitor has asked us. Email taxadvisory@aswatax.co.uk with the question you'd like answered. We can't promise to cover every suggestion, and we won't write about a specific client's affairs, but questions that come up often are the ones we most want to answer well.

You're welcome to share links to our articles with clients and colleagues. If you'd like to quote from one, keep the quote short, credit Holding Company by ASWATAX and link to the original, so readers can see the date and any later updates. Please don't republish full articles elsewhere, because they may change as the rules do.

Because group structures are easier to follow as pictures. A diagram shows who owns what before and after a change, which way cash or dividends flow, and where a relief applies. On this site the colours are fixed, so a holding company is always blue, a trading company green, an investment company amber and a property company brick, wherever you see it.

They cover how property and demergers fit into a holding company group. For deeper reading on property companies and property tax, see our sister site Property Tax Advisory (propertytaxadvisory.co.uk), and for splitting companies and groups, Demerger Tax (demergertax.co.uk). Transaction Tax Partners (transactiontaxpartners.co.uk) covers selling a business in more depth. The same firm is behind each.

Where numbers help, yes. Examples use simple, round figures and the 2026/27 rates and allowances, to show how a rule works rather than to predict any real company's tax. Names and businesses in examples are illustrative, not real clients. For your own figures, the tools on this site let you try the numbers, and a call lets us check them properly.

Look at the review date at the top of the article and the tax year it refers to. We review articles when the rules change, and update the date when we do. If an article refers to a rate, threshold or relief that you think has changed since, check the relevant service page, which is reviewed on the same basis, or ask us.

Yes. Use the sign-up box in the footer of any page, or tick the box on the Book a call form, to receive occasional emails with holding company and group tax insights. You can unsubscribe at any time. If you're a client, we'll also tell you directly about any change that affects work we're doing for you, so you don't need to rely on emails for that.

Both, and we say which is which. Where HMRC has published guidance, such as its view on what counts as substantial non-trading activity, we explain it and cite the manual. Where the law is uncertain or HMRC's view is open to challenge, we say so. Our own practical observations are clearly presented as ours, not as statements of HMRC policy.

There are six. The Structure Lab lets you build a group step by step and see the tax consequences. 'Is a holding company worth it?' compares keeping profits in one company with using a holding company. There's also a substantial shareholding exemption checker, an associated companies calculator, a sale structure comparison and a clearance timeline planner. Each links to the page that explains the rules behind it.

The Structure Lab, at /tools/structure-lab, is an interactive builder. You start with a single trading company, then add a holding company, a second trading company, an investment company or a property company, and choose an outcome such as selling a subsidiary, selling the group, splitting it or passing it to family. The diagram redraws as you go, and each step shows the main tax points, clearances and links.

Use it to sketch where you are and where you'd like to be. Build your current structure, then try the changes you're considering and read the tax points that appear at each step. You don't need to get it right; the aim is to see which questions matter. Bring the structure you end up with to your first call and we'll start from there.

It compares two broad ways of running a profitable company: keeping everything in one company, or adding a holding company above it so surplus profits can move up as dividends and be kept away from trading risk. It shows the effect on the tax you pay as profits are retained and extracted, using 2026/27 rates, so you can see whether the numbers point towards a holding company at all.

It's a guide, not a calculation of your actual tax. It uses simplified assumptions and the current rates, and it can't take account of every factor, such as your other income, past dividends, existing loans or the costs of setting up and running a group. Treat the result as a sense of scale and a reason to ask questions. We'll check the real numbers on a call.

The SSE checker, at /tools/sse-checker, walks through the main conditions for the substantial shareholding exemption when a company sells shares in another company: how much of the shares it holds, for how long, and whether the company being sold has been trading throughout. It gives an indication of whether the exemption is likely to apply and flags the points that need closer checking before a sale.

No. It can show whether the main conditions appear to be met on the answers you give, but whether a company is trading, and whether non-trading activities are substantial, are questions of fact that depend on detail the checker can't see. Degrouping charges and the history of the shareholding can also affect the result. Before agreeing a sale, have the position checked properly.

It shows how the number of associated companies affects corporation tax. The £50,000 and £250,000 limits for the small profits rate and marginal relief are divided between associated companies, so adding a holding company or a sister company can change the rate each company pays. The calculator, at /tools/associated-companies-calculator, lets you try different profit levels and numbers of companies.

It compares the two main ways an owner can sell a business held in a group: shareholders selling their shares in the holding company, or the holding company selling its subsidiary and keeping the proceeds. It sets the tax on the sale and on getting the money out side by side, so you can see how timing and what you plan to do with the proceeds change the answer.

It helps you work backwards from a target date. Inserting a holding company usually involves an application to HMRC for clearance before shares are issued, a statutory response period, the share exchange itself and then the stamp duty adjudication. The planner, at /tools/clearance-timeline-planner, lays those steps out against your dates, so you can see when the work needs to start.

No. The tools are designed to run in your browser without an account, so you can try them straight away. Your inputs aren't sent to us unless you choose to get in touch. If you'd like to discuss your results, book a call and mention which tool you used and roughly what you entered, so the adviser can pick up from there.

The tools use the rates and limits for 2026/27, the current tax year, including the corporation tax rates and limits for the financial year from 1 April 2026 and the dividend rates that apply from 6 April 2026. When rates change, we update the tools and the pages that explain them. If a result looks out of line with what you expected, check which year you're planning for.

Yes. Many advisers find a diagram or a side-by-side comparison helps a client understand why a holding company, a subsidiary sale or a clearance matters. The tools are a starting point for that conversation, not a substitute for advice on the client's facts. If the results suggest a structure is worth exploring, introducers are welcome to bring us in.

Because the tools simplify. They ask a limited number of questions and make reasonable assumptions about the rest, such as how profits are extracted or how long you'll keep the structure. Your adviser can take account of your other income, your company's history, family plans and anything else that changes the outcome. Where the two differ, the advice on your facts is what counts.

If you're not sure whether a holding company makes sense, start with 'Is a holding company worth it?'. If you already know the shape you want, use the Structure Lab to build it and see the tax points. If a sale is on the horizon, try the sale structure comparison and the SSE checker. If timing is the question, the clearance timeline planner is the place to begin.

The simplest way to keep a result is to print the page or save it as a PDF from your browser. If you're planning to discuss the results with us, a screenshot or a note of the inputs you used is just as helpful. We'll rebuild the numbers with your actual figures on the call, so you don't need to capture every detail.