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Holding Company

Advantages of forming a holding company

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I have a client who has 5 branches cofe shops

Each branch turnover individually an average of £650,000

The total turnover of the whole business as per the last financial year is £3.4m

Currently the business structure of each branch is a limited company.

I am thinking that the client might benefit from forming a holding company. 

Is it worth it to form a holding company?

Can someone direct me where to start and what things I should take into account please?

Replies (16)

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By G JAin
28th May 2020 16:42

Hi Malek,
Holding company can have advantages - the biggest being ringfencing of your client's assets. The holding company will hold assets like cash which can then be invested in new ventures. It keeps the money safe from creditors in case the the subsidiaries were to go bust.
However, forming a holding company is costly and complex process. I can assist you should you need my help as I have done fair few of them.
Kind regards
G J

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Replying to G JAin:
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By Malek
28th May 2020 17:43

After forming the Holding company, would the current companies (will be the subsidiaries) still be required to deliver a set of accounts to CH and HMRC?

Yes definitely I need help with this one.

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Replying to Malek:
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By Bobbo
28th May 2020 19:32

Malek wrote:

After forming the Holding company, would the current companies (will be the subsidiaries) still be required to deliver a set of accounts to CH and HMRC?

Is that a serious question? ... are you sure you 'have a client' and are not actually the client yourself?

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Replying to G JAin:
blue sheep
By NH
29th May 2020 06:11

Costly and complex? No
In my experience there are plenty of "specialists" out there who will tell you it is, but any decent accountant will be able to advise properly on this, we have just done two of these restructures and if a client is in a position to need to do this it will not be costly or complex (for a suitably qualified accountant) to carry out

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Replying to NH:
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By Tax Dragon
29th May 2020 07:01

NH wrote:

Costly and complex? No
In my experience there are plenty of "specialists" out there who will tell you it is....

Like I said, there are tax cons as well as pros.

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Replying to Tax Dragon:
blue sheep
By NH
29th May 2020 07:12

nice one! I didnt get that first time around....

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Replying to Tax Dragon:
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By G JAin
29th May 2020 10:45

What tax cons please?

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Replying to G JAin:
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By Tax Dragon
29th May 2020 11:08

G JAin wrote:

What tax cons please?

Starter for 10 - see my reply to Matrix below.

On your other question - I don't think the process is complicated, but I do think you should give a decent analysis of the tax consequences. One con (geddit?! a triple meaning!) would be to say there are no tax downsides.

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Replying to NH:
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By G JAin
29th May 2020 10:44

Can you share why it is not complex and costly considering the process involves lots of paperwork and approvals? Maybe I am missing something.

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By Tax Dragon
28th May 2020 17:30

Malek wrote:

I am thinking that the client might benefit from forming a holding company.

Why? Doing that can be costly and complex. Apparently.

And the advantage of ringfencing each branch already exists, as each is an a separate company.

Are the shares of each company held personally, is that what you mean? And you want to form a group? Is that it?

It's simple enough to do, but I go back to why do it in your client's case?

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Replying to Tax Dragon:
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By Matrix
28th May 2020 17:35

Coffee shop. Losses. I never get why such a large business wouldn’t have this contingency in place already.

We used to set up groups for ACT but I assume that was before your time.

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Replying to Matrix:
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By Tax Dragon
28th May 2020 17:38

There are tax cons as well as pros.

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By Matrix
28th May 2020 17:45

In what way? None of my clients are big enough for me to look into it so I am probably 20 years out of date.

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Replying to Matrix:
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By Tax Dragon
29th May 2020 07:05

The double meaning was deliberate (now hopefully spelled out above).

But to answer your question on the advantages and disadvantages meaning... you are thinking only of the taxation of the companies. Think also of the taxation of the owners.

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By frankfx
28th May 2020 17:34

https://www.accountingweb.co.uk/any-answers/holding-company-9

You raised a similar question 8 months ago.

Has your knowledge grown or left fallow, the client may be losing out .

Have you bought a book on the subject?

Have you looked at your own research material, though that seems to be lacking.

The client or clients are sizeable . Well worth self investing in CPD for your own benefit and client .

You could share your ideas on a proposed H co. structure and then ask AWEBers for insight .
But if you are bereft of ideas it is a little unfair to ask us IMHO to share our wealth and depth of knowledge, often won at the expense of reading some/ much research material at £ cost and time cost.

As stated above it seems that your knowledge gap has not been filled in past 8 months .

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Replying to frankfx:
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By Tax Dragon
28th May 2020 17:41

Or the client may be winning. It depends.

Useful extra background though (hard to believe the same person wrote both questions - the old one makes sense!)

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