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Corperation tax for Ltd holding companys?

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R

ric flair

Free Member
Feb 21, 2009
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Hi,

I am considering using a Ltd holding company, that will own two other Ltd company’s.

The holding company won’t be trading so to speak, but neither will it be dormant. All it will do is own two other company’s. No ingoing’s or outgoings. Just assets (i.e the two sibling companys).

Will I need to pay corporation tax for the parent company? (lets assume the two sibling companys have made a tidy profit).

Thanks
 
Each company pays tax in its own right, therefore if it does not trade and only holds the shares of the 2 subsidiaries (& these are not disposed of in the year) the holding co will not have a tax bill. I assume you own the two (to be) subsidiary companies just now and they will probably therefore be associated companies, and the small companies taxable profits allowance will be split equally between them. By introducing a third this means that the small companies profit allowance may have to be split equally in 3 and the rate of corporation tax may increase if profits are high enough ! The counter to this is that group relief may become available which allows losses in one subsidiary to be offset by profits in another. There are also other tax implications on any future disposal of the companies so be careful how you proceed.

This all depends on your specific circumstances and hope this helps but you're getting into a complex area which may need professional advice. It will depend on various criteria whether it is best for you or not which you obviously don't want to divulge publicly.
 
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HMRC have stated that holding companies won't be treated as trading companies (and therefore become associated for corporation tax purposes) provided that they only hold shares in their subsidiaries and receives dividends from those subsidiaries.
 
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