Setting up a holding company

The most common is a share-for-share exchange, where a new company issues shares to the existing shareholders in return for their shares in the trading company, so it sits on top. Other routes include forming a new company first and starting new ventures beneath it, buying another business through a new company, or creating new holding companies as part of a demerger. Each has different tax steps.

Often, yes. If the holding company is in place first, the new venture can be formed as its subsidiary from day one. If the shareholders set up the second company personally, it becomes a sister company, and bringing both under one holding company later means another share exchange and possibly another clearance. Planning the order up front usually keeps things simpler.

Usually several. Capital gains tax relief on the share exchange depends on the reorganisation rules and their anti-avoidance test. HMRC also considers the income tax rules on transactions in securities. Stamp duty arises on the share transfer unless relief is claimed. Corporation tax changes because the companies become associated. If property moves too, stamp duty land tax comes in as well.

In practice, usually yes. Capital gains relief can apply if the holding company ends up with more than 25% or control, but stamp duty relief on a share exchange generally needs the holding company's shareholders and their proportions to mirror the original company's. A holding company that owns 100% is also simpler for group reliefs. If someone won't take part, take advice before going further.

It's usually better to treat them as separate steps. Changing who owns what during the share exchange can affect stamp duty relief, which depends on the shareholdings matching, and can make HMRC look harder at the purpose of the arrangements. Whether the new shareholder comes in before or after the holding company depends on the reasons and the tax position, so plan the order carefully.

There are now at least two companies, each with its own board decisions, minutes, statutory registers and filings. Dividends usually move from the trading company to the holding company before going to shareholders, and each step needs proper approval. Directors also need to think about which company employs whom and which company signs contracts, so that the group works the way it was designed.

Yes. The holding company is a separate legal person, so it files its own accounts at Companies House, its own confirmation statement and its own corporation tax return. Whether consolidated group accounts are also needed depends on the size of the group, and many smaller groups are exempt. Your accountant will usually take this on as part of the annual work.

Usually very little. The trading company carries on as before, with the same contracts, employees, VAT registration and bank accounts. What changes is who owns its shares. Some contracts, leases and finance agreements include change of control clauses that are triggered when the direct shareholder changes, even if the ultimate owners don't, so check those before the share exchange.

Often, yes. Loan agreements, overdraft facilities and guarantees commonly include terms about changes of ownership or group restructures, and breaching them can cause problems even if nothing else changes. It's usually a simple conversation if the bank is told early. The bank may want the holding company to join a guarantee or to be told how cash will move within the group.

Its name, its directors, its share classes and articles, and who will own it in what proportions, which normally mirror the trading company. It also helps to decide early what the holding company is for: holding surplus cash, owning property through a subsidiary, starting a new venture or preparing for a sale. That purpose shapes the clearance application and the order of the steps.

The process is the same, but the test HMRC applies has changed. For shares issued on or after 26 November 2025, the old bona fide commercial reasons test was replaced by a main purpose test, and the protection for small shareholders holding 5% or less has gone. That makes a clear commercial rationale and an advance clearance more valuable than before.

Yes. The same share-for-share exchange works for a sole shareholder, who exchanges all their shares in the trading company for shares in the new holding company. The same reliefs and conditions apply, and HMRC clearance is still worth considering. A single owner may also want to think about whether family members should hold shares in the holding company in the future.

Keep the clearance application and HMRC's reply, the share exchange agreement, board minutes and resolutions, the adjudicated stock transfer form, Companies House filings and any valuations. These records show that the exchange qualified for relief and establish the base cost of the holding company shares. A buyer's lawyers, or HMRC, may ask for them years later.

It's rarely impossible, but timing matters. Once a sale has been agreed, a restructure whose main aim appears to be reducing tax is more likely to be challenged and less likely to be cleared. Some reliefs also need time: a holding company generally needs to have held a subsidiary for 12 months before the substantial shareholding exemption can apply to a sale of it.

It's a commercial choice. Many owners add 'Holdings' or 'Group' to the trading company's name so the link is obvious to banks, customers and staff. Others choose a neutral name to keep the holding company low-profile. The name must meet Companies House rules and can't be the same as an existing company's. It has no effect on the tax analysis.