Holdings company?

[PurpleMoonlight]

I have the opportunity to purchase a small Ltd (D Ltd) providing the same services that I do. I'm wondering if now would be an appropriate time to establish a holdings company.

Currently my structure is:

A Ltd - the main business
B Ltd - non trading and wholly owned by A Ltd
C Ltd - side business and wholly owned by A Ltd

I want to use the cash in A Ltd to purchase D Ltd.

Would there be any advantages to establishing a holdings Ltd (H Ltd).

I would like it to directly own A Ltd, B Ltd, C Ltd & D Ltd ie, pulling B Ltd & C Ltd out from A Ltd. Is this possible?

Can A Ltd lend funds to H Ltd so it can buy D Ltd?

Would the whole thing have to be taxed as a group? Currently A Ltd & C Ltd are taxed independently.

[Eric Mc]

Too complicated unless you are prepared to pay accountants sufficient fees to keep it all in order.

[PurpleMoonlight]

I thought holdings companies are fairly common.

[trickywoo]

I've got a Holdings company which owns a Ltd. it was set up to buy out the other shareholder in the Ltd via a loan.

This was a few years ago.

Its a bit of a PITA now to be honest as it adds a layer of admin which I don't need and also cost. My accountant charges about £400 for the annual Holdings return and all it does is pay me dividends.

I'm also not 100% comfortable with the arrangement as while I employ a chartered accountant I also like to know whats what myself and the holdings company arrangement is a bit complicated for me.

If you can work out what it'll save you and what it will cost long term and its still positive it may be worth doing but think carefully as you'll likely be stuck with the arrangement as long as any of the companies are trading.

[PurpleMoonlight]

True it would add an additional annual accounts fee.

I suppose the main advantage is protection. If A Ltd owns everything and something awful happened it could drag C Ltd & D Ltd down with it.

[Eric Mc]

I agree with the previous comment. Having two companies makes life more than twice as complicated, Having one of the companies also a holding company makes life a LOT more complicated.

For instance

Company A (original company) completes statutory accounts.
Company A also completes Corporation tax return
Company A pays it Corporation tax liability
Company A needs to submit an annual Confirmation Statement to Companies House each year

Company B (the holding company) has to do all the above as well

HMRC may also want additional information on the tax returns of each company stating relationships between the companies and the individuals and also details as to how Corporation Tax reliefs and claims are allocated within the "group".

Consolidated accounts (both sets of accounts merged) might also need to be completed - although a small holding company can apply to have this exempted PROVIDED they make the right type of applications to HMRC.

I refuse to get involved in such complex set ups to be honest.

[PurpleMoonlight]

Okay, ta.

[Buffalo]

No question that it makes the accountancy aspect becomes more complicated, however, your concern about security is an important one to reconsider. It may outweigh the irritation suffered by your accountant...

FWIW I have just done a similar thing myself, and for a similar reason. To me, it felt like the right decision for the business, which outweighed the marginal increase in accountancy overheads.

[Eric Mc]

How marginal?

[Deesee]

PurpleMoonlight said:

I have the opportunity to purchase a small Ltd (D Ltd) providing the same services that I do. I'm wondering if now would be an appropriate time to establish a holdings company.

Currently my structure is:

A Ltd - the main business
B Ltd - non trading and wholly owned by A Ltd
C Ltd - side business and wholly owned by A Ltd

I want to use the cash in A Ltd to purchase D Ltd.

Would there be any advantages to establishing a holdings Ltd (H Ltd).

I would like it to directly own A Ltd, B Ltd, C Ltd & D Ltd ie, pulling B Ltd & C Ltd out from A Ltd. Is this possible?

Can A Ltd lend funds to H Ltd so it can buy D Ltd?

Would the whole thing have to be taxed as a group? Currently A Ltd & C Ltd are taxed independently.

Create LLP x for b&c, close B&C, members you and a.
Create LLP z for d , with A old co & you as member.

[PurpleMoonlight]

Deesee said:

Create LLP x for b&c, close B&C, members you and a.
Create LLP z for d , with A old co & you as member.

What advantage would that have?

[anonymous-user]

PurpleMoonlight said:

Deesee said:

Create LLP x for b&c, close B&C, members you and a.
Create LLP z for d , with A old co & you as member.

What advantage would that have?

I was wondering that too.

[Deesee]

EddieSteadyGo said:

PurpleMoonlight said:

Deesee said:

Create LLP x for b&c, close B&C, members you and a.
Create LLP z for d , with A old co & you as member.

What advantage would that have?

I was wondering that too.

Op has not provided all the details of companies (and rightfully so) and what they do etc, shareholders etc, so it’s all a bit grey, and just a suggestion from me.

It would issue some protection to Co A, and separate the trading activity of a (&d), from the non core current activities of b&c, whilst retaining the ability of company a to invest/lend to the other companies.

[anonymous-user]

Is there a reason you would keep 'D Ltd' as a separate entity from 'A Ltd' once you'd bought it, if both do the same thing? If company A is intended to be an asset, increasing in value, as well as a source of income, it might more sense to integrate the two.

Are your businesses VAT registered and will there be intra company sales? A holding could mean group VAT accounting.

[PurpleMoonlight]

A Ltd and D Ltd are VAT registered, C Ltd isn't.

At the moment the owner of D Ltd is looking to sell the shares. That would inconvenience its clients the least.

I would probably prefer to purchase its trade, but that would inconvenience its clients the most.

It seems to me that at the moment A Ltd is both a trading company and a holdings company.

[Alpinestars]

PurpleMoonlight said:

I have the opportunity to purchase a small Ltd (D Ltd) providing the same services that I do. I'm wondering if now would be an appropriate time to establish a holdings company.

Currently my structure is:

A Ltd - the main business
B Ltd - non trading and wholly owned by A Ltd
C Ltd - side business and wholly owned by A Ltd

I want to use the cash in A Ltd to purchase D Ltd.

Would there be any advantages to establishing a holdings Ltd (H Ltd).

Currently you can’t sell A Ltd without selling B and C, or stripping them out prior to the sale. A flat structure would allow you to sell any of them individually. There will be other consequences of a flat structure, but that’s one example.

PurpleMoonlight said:

I would like it to directly own A Ltd, B Ltd, C Ltd & D Ltd ie, pulling B Ltd & C Ltd out from A Ltd. Is this possible?

Yes, you can do this via a tax free share for share.

PurpleMoonlight said:

Can A Ltd lend funds to H Ltd so it can buy D Ltd?

Yes. Or A could buy D, and then set up the holding structure.

PurpleMoonlight said:

Would the whole thing have to be taxed as a group? Currently A Ltd & C Ltd are taxed independently.

A, B and C are already in a tax group. H and D will join the group. You’ll be able to offset any losses with profit making companies as an example of a consequence of being in a group. Each company will continue to be taxed as individual entities.

[Eric Mc]

All very straightforward.

How big is this enterprise going to be?

[PurpleMoonlight]

Alpinestars said:

PurpleMoonlight said:

I have the opportunity to purchase a small Ltd (D Ltd) providing the same services that I do. I'm wondering if now would be an appropriate time to establish a holdings company.

Currently my structure is:

A Ltd - the main business
B Ltd - non trading and wholly owned by A Ltd
C Ltd - side business and wholly owned by A Ltd

I want to use the cash in A Ltd to purchase D Ltd.

Would there be any advantages to establishing a holdings Ltd (H Ltd).

Currently you can’t sell A Ltd without selling B and C, or stripping them out prior to the sale. A flat structure would allow you to sell any of them individually. There will be other consequences of a flat structure, but that’s one example.

PurpleMoonlight said:

I would like it to directly own A Ltd, B Ltd, C Ltd & D Ltd ie, pulling B Ltd & C Ltd out from A Ltd. Is this possible?

Yes, you can do this via a tax free share for share.

PurpleMoonlight said:

Can A Ltd lend funds to H Ltd so it can buy D Ltd?

Yes. Or A could buy D, and then set up the holding structure.

PurpleMoonlight said:

Would the whole thing have to be taxed as a group? Currently A Ltd & C Ltd are taxed independently.

A, B and C are already in a tax group. H and D will join the group. You’ll be able to offset any losses with profit making companies as an example of a consequence of being in a group. Each company will continue to be taxed as individual entities.

Ta.

B Ltd doesn't trade and never will. This is deliberate.

A Ltd, C Ltd & D Ltd are all in profit and unlikely to be in loss.

Edited by PurpleMoonlight on Sunday 8th July 10:46

[PurpleMoonlight]

Eric Mc said:

All very straightforward.

How big is this enterprise going to be?

I thought you were't keen

[Eric Mc]

PurpleMoonlight said:

I thought you were't keen

I'm not. But I suppose if the assets being shunted around are of very high value or numerous then maybe a complex structure such as this will yield dividends.

I would definitely talk it through very carefully with an accountant who specialises in this type of set up and you are fully briefed on all the tax implications for your personally (Income Taxes and Capital Gains Taxes) and for the numerous companies (Corporation Tax and Capital Gains Tax).

Not to mention other property related taxes such as Stamp Duties and maybe even VAT.

And an accountant who is honest about the fees that will be incurred in maintaining the set up.