£3350 + VAT for setting up holding company?

Any downsides to making current trading co the holding co and registering a new trading sub under?

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Hi all, was hoping I can get some advice. I currently own 100% of my trading company. It has £450k in cash reserves that I would like to invest into property. I wanted to create a holding company which will own my trading company, and create 2 new subsidiaries under the new holding company (a property holding company, and a property management company). 

The accountant I spoke to said £3350 + vat for setting up the holding company. Surely it cant be that much. I passed my AAT and ACCA exam years ago (back when I still had hair), never practiced but have been keeping my own books and filing my own returns for more then a decade. Had I known accountants make this much maybe I would have gone for a career in accounting ha! 

Anyways, is it feasible that I do this myself. From my understanding the process is as follows:

- Seek HMRC clearance for a share for share exchange (do I even need clearance?)
- Set up HoldingCo 100% owned by me
- Transfer assets (cash reserves) via dividend from trading sub to parent 
- Loan funds from parent to property holding sub 

An alternative scenario is I just register a subsidiary under my current trading company and make the current company the holding company by ceasing all trading and deregistering for vat and paye.

It will mean having to register for VAT and PAYE under the new sub trading company, but thats not a big deal as my only employees are family members. Other then that what other downsides is there to this alternative scenario. I cant think of anything else. Plus I wont have to explain myself to HMRC on any share exchange. 

Replies (15)

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By Tax Dragon
19th Apr 2024 15:34

If the £3,350 includes tax advice that's less than we would charge, take it.

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Replying to Tax Dragon:
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By mrgushan
19th Apr 2024 16:01

OK understood, what about the alternative of making my current trading company into a holding company. Any downsides other than what I have already pointed out.

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Replying to mrgushan:
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By Tax Dragon
19th Apr 2024 17:37

It would be the usual way of doing it if it was issue free, don't you think?

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Replying to Tax Dragon:
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By mrgushan
19th Apr 2024 17:42

So enlighten me, other then what I have already pointed out what are the other issues?

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Replying to mrgushan:
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By Tax Dragon
19th Apr 2024 17:56

No. Not even if you'd said "please".

If this advice isn't included in the quote you have had, that might explain why it's so low; if it is, I don't propose to deny your advisors their crust.

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Stepurhan
By stepurhan
19th Apr 2024 15:44

Speak to other accountants first. Just because you think the first accountant you spoke to was quoting too much doesn't mean that DIY is your only other choice. I would imagine getting this wrong could prove very expensive in the long run so paying someone, with insurance to cover if things are done wrong, would be a good idea.

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By carnmores
19th Apr 2024 16:04

my client has just been quoted £12,000 for exactly the same process bu a big firm of solicitors. i am not sure that i follow your logic on transferring of assets, if its cash why are you doing this anyway. Earlier replies spot on

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Replying to carnmores:
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By mrgushan
19th Apr 2024 16:21

The movement of the cash itself is irrelevant, I meant that I wanted the asset to be on the balance sheet of the parent company, which I was going to do via a dividend. Isn't that one of the points of a holding co, to keep the balance sheet of your trading co low to protect yourself from any litigation etc.

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RLI
By lionofludesch
19th Apr 2024 16:43

You can absolutely do this yourself.

Whether you can do it successfully is quite another matter.

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Replying to lionofludesch:
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By Tax Dragon
19th Apr 2024 17:40

Sometimes doing something unsuccessfully isn't really doing it. Ever seen Titanic?

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Replying to Tax Dragon:
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By FactChecker
19th Apr 2024 21:17

Is it fair to mention the Titanic when OP keeps introducing subs?
Next you'll be suggesting he avoids anything where he can't see below the surface!

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Replying to lionofludesch:
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By mrgushan
19th Apr 2024 17:48

So what about the alternative, creating a sub under my current company, and current company ceases trading and is just used as a holding company.

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By paul.benny
20th Apr 2024 16:00

How about phrasing the question differently? Such as
I have £450k surplus cash in my trading company that I would like to invest for [insert reason]. What are the options for structuring this?

If you ask the question this way, a whole lot of other answers present themselves - for example you could, subject to your other circumstances, invest the funds via a SIPP, which would still let you invest in property and shelter the returns from tax.

That said, I might also be asking about your asset allocation. If you invest the £450k into property, your portfolio may be somewhat heavyweight on an illiquid asset class, and within that, have very little diversification: £450k doesn't buy a lot of real estate. Prices don't always go up.

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By Dp2020
22nd Apr 2024 12:27

You will need to apply to HMRC for tax clearance , complete the transfers, prepare share purchase agreements and resolutons and then apply for stamp duty exemption on the swap sending company registers etc. The price seems reasonable.

Whether you need a group is another matter, why not set up an SPV proeprty company or property company owned by holding company and inter co loan the funds across from trading company, interest can be charged if wish. This doesn't solve liability on cash in trading co , that may still need a share swap to divi up

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paddle steamer
By DJKL
22nd Apr 2024 12:43

Why do you need a group?

Any thoughts about one company just lending to another company instead, no group?
Have you considered what such a group does re BPR?

Why do you want property in a company anyway? What type of property?

Is it merely availability of the cash taking you in this direction?

I would examine what you wish to achieve rather than the mechanics of the exercise.

I would also consider what assets and liabilities the existing company has that might need moved around, this would certainly have a bearing on what structure needed to be invented.

(I have a natural dislike re investment property in companies but that is possibly more personal prejudice than anything else, sometimes needs must, sometimes they are already there, but certainly I would not usually aim for it as an outcome unless there were strong other reasons)

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