UK Reflecting Holdco Ownership & Transfer of Dividends to Holdco

[Berez123]

Hi,

I'm slightly concerned that I've been provided incorrect advice. I'd like to create a holding company which takes a 100% ownership stake in the shareholding of a subsidiary. I would then like to pay up all earnings and current assets (mainly cash & some equity investments) to the holding company. It has been explained that this is a straightforward case of using companies house and the confirmation statement to reflect the new ownership structure, and simply reporting the new assets on the balance sheet of the Holding company, while they leave the subsidiary balance sheet. This doesn't quite chime with what I've seen written elsewhere so figured this might be the best place to seek out the correct advice.

Thanks,
Alex

 

[Truemanbrown]

It is not a simple procedure.

What you are proposing is a share-for-share exchange so that you are transferring the shares in the old subsidiary company for shares in the new holding company.

You are transferring your shares in the subsidiary to the holding company which has a value. In theory, a capital gains tax liability should arise.

However, you can claim holdover relief on the share-to-share transfer so that you would only pay CGT if and when you sell the Holding Company.

There is an advance clearance procedure that you should perform, although it is not mandatory, to apply for clearance from HMRC.

The procedure exists so commercial decisions are not hindered by uncertainty about the possible application of the anti-avoidance provisions (e.g. to ensure the transactions was made to avoid tax).

For practical reasons only the company whose shares or debentures are being acquired or the company making the acquisition can apply for clearance. TCGA92/S138 allows either of these companies to apply to the Board for confirmation that the anti-avoidance provisions of TCGA92/S137 will not prevent TCGA92/S135 from applying.

For the clearance to be valid the application must be made and dealt with before the new shares or debentures are issued.

I have done a couple of these clearance letters recently.

Then you can do the transfer in the normal way (i.e. stock transfer forms), issue new share certificates and amendments to the records at Companies House.