hi there Nicholas Campion here with the inaugural edition
of the 1st formations video series we're going to jump straight into it
looking today at what exactly is a holding company, now in essence a
holding company is an entity set up specifically to deal with
assets investments and management rather than the provision of goods and services
with the view to making a profit from production or sales
such a company is usually limited by shares and its main activities will
involve the owning of assets in another company
or perhaps a group of companies these assets could be anything
from shares to intellectual property and indeed real property
holding companies may also be responsible for the supervision
and management of other companies in addition to or perhaps instead
of simply holding the shares and receiving dividends
aside from these functions a holding company will not normally trade
or conduct any other business activity now in order to qualify as a holding
company or more specifically as a parent company
the company's act requires that the company holds greater than 50
of the voting rights in the subsidiary or that it be a member of the subsidiary
with the ability to appoint or remove a majority of the directors or to be a
member of a subsidiary in accordance with the agreements with
the other shareholders to hold the exclusive rights of the
voting in said subsidiary.
now from a tax point to view what are these holding companies all about
perhaps one of the biggest attractions of a holding company
is the potential for tax savings most share disposals and dividend payments to
holding companies are actually exempt from tax if a
holding company owns a substantial shareholding of at least
10% of the ordinary shares in a subsidiary
for a period of 12 months during a two-year period preceding the
disposal it can dispose of these shares while
being exempt from the capital gains this is known as the substantial
shareholder exemption and it is on the provision that the
holding company and the subsidiary company
are active businesses for 12 months before and after the disposal
a holding company will also be exempt from vat taxable supplies
if its basic functions are simply to acquire or dispose shares and
subsidiaries receive dividend payments and defend
itself and its subsidiaries from takeovers
HMRC does not view these functions as taxable supplies
and therefore any holding company that operates with these
basic functions alone will not be liable for vat
indeed it is not possible for this type of holding company to voluntarily
register for vat if however the holding company provides
or intends to provide taxable supplies to a subsidiary this
could be supervision and management services
it will be permitted to voluntarily register for VAT
and of course compulsory VAT registration will then apply
when the annual taxable turnover exceeds £ 85 000
and that is correct for the 2020-2021 tax year.
the question therefore arises can I use the word holding in my company name
and the simple answer is yes you can up until recently
the word holding was what's considered a sensitive word
and this meant there were restrictions in place on its usage
however, these restrictions were lifted in January 2015
and it is now possible for anybody to register a company with the words
holding or holdings without the prior permission
from Companies House. So how exactly do you incorporate a
holding company well the good news is the process is
virtually identical to setting up any other private limited company by
shares as such you'll need to register the company with company's house
and ensure that the company adheres to the strict filing requirements and
regulations that pertain to all companies in the UK
1st formations offer a range of online packages
perfect for registering your company limited by shares and to do so we'll
just need some information from you including the company name registered
office standard industrial classification codes
that's information about the activities of your company
details of the directors details of the shareholders details of the shares being
issued to the shareholders information about the people with
significant control the memorandum and articles of association
and finally any other supporting documentation that may be needed
to use your particular company name your application form will then be submitted
to Companies House electronically and provided everything
is okay your new company will be registered
within three working hours we'll send you a confirmation email
together with the digital copies of your incorporation documents
and if you require hard copy documents these can be posted to you within 24
hours registering your company through
1st formations allows you to use our online company manager
which allows you to monitor the progress of your application once it's been
submitted to company house and after incorporation this facility
can then be used to manage and update your company's
details online as well as report certain changes to companies house
that's it for this week please like and subscribe to our channel to receive
more updates just like this one as part of the 1st formations video series
till next time