Tax implications of transferring business to new holding company

Tax implications of transferring business to...

Didn't find your answer?

Apart from halving the small companies rate band (and doubling the annual admin), are there any other tax implications from the following?

1. Client sets up NewCo and transfers shares in OldCo to NewCo in exchange for shares in NewCo, so that NewCo becomes holding co.

2. Business is transferred from OldCo to NewCo, except for leases, which are retained by OldCo (the resulting subsidiary).

3. NewCo (holding) carries on the business and rents the premises from OldCo (subsidiary).
OldCo rents the premises to NewCo at zero profit/loss.

Replies (3)

Please login or register to join the discussion.

avatar
By HeavyMetalMike
22nd Mar 2011 21:41

Other way round

Your supposed to transfer the property to New co and then rent that to old co.

Then, if the business goes down, New co is protected.

VAT specialist will "bang the drum of VAT group regn" but don't. For the same reason.....ie if oldco goes down.

Thanks (0)
avatar
By fellowcraft
22nd Mar 2011 22:10

Purpose
Is the purpose to ringfence the trade & keep onerous leases in the subsidiary? Just be careful as the lease agreement almost certainly requires landlords consent to sublease

Thanks (0)
avatar
By chatman
23rd Mar 2011 00:14

Good responses

Not tax related but good. Thank you both. 

Fellowcraft, yes the  purpose is to separate the onerous leases from the rest of the business. Is there no way round that?

HeavyMetalMike, the reason for doing it this way is that the lease cannot be assigned to NewCo without the landlord's permission. The assets end up in the holding company, so they are protected from the landlord. What have I missed?  

Thanks (0)