Reasons to Set Up an Investment Holding Company in the United Kingdom
3E Accounting gives you all the needed reasons to set up an investment holding company in the UK.
There are many reasons to set up an investment holding company in the UK, and almost all of them are beneficial. Having a holding company is all about prudently spreading risks, but it is a step that should be done cautiously. The last thing any business wants is to be surprised by additional taxes. Agencies such as 3E Accounting offer services that help companies get the best of both worlds.
A Company to Hold Investments
An investment holding company is usually created to enable the formation of a corporate group. It is a distinct entity which is separate from the parent company. However, it does own a controlling interest in one or more subsidiaries or companies in the group.
An investment holding company is not required to conduct business activities or any form of trade. It that sense it differs from the parent or other subsidiaries. Holding companies instead focus on:
- Holding assets and shares
- Owning real estate or intellectual property
- Management of other companies
- Receiving share-holding dividends
Having a holding company in the corporate group structure is usually done as a strategic move in risk management. It spreads the risk of multiple trades and business activities carried out by the trading companies in the corporate structure. It also minimises the risk that arises from a company that inadvertently becomes insolvent or performs poorly. Hence, a subsidiary with a high-risk business activity will not necessarily jeopardise the rest of the corporate structure. As long as the holding company does not guarantee a debt, it can avoid liability. This is a crucial move in limiting the impact of insolvency, especially in bigger multinational companies.
Other significant advantages include:
- Administrative and management costs, operations and activities can be centralised in the holding company. Subsidiaries can then be charged accordingly for services. Centralising activities and operations also streamline efficiency and ensure better governance and compliance.
- Investments, assets, real estate, etc. can be better protected in a move known as ‘ring-fencing’. The holding company can own these and lease them out to the subsidiaries instead. This protects assets from creditors and other risks should the subsidiary face litigation.
- Perhaps the biggest advantage accrues from tax considerations. It is a legal rule that a UK holding company is subject to UK corporation tax. However, a holding company can dispose of shares or make dividend payments that take advantage of tax benefits and exemptions. In certain circumstances, it can also enjoy exemptions from valued added tax or VAT.
These reasons to set up an investment holding company in the UK should convince any enterprising entrepreneur to take advantage of its benefits. 3E Accounting, as expert business solution providers, offers unparalleled services in company formation. Your investment holding company can be up and running within a day. Along with our global partners and affiliates, we ensure that your business can access the best and most innovative business solutions. Contact 3E Accounting today to speak to industry professionals and make that crucial difference in your business.