A holding company over two companies

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.