What is a holding company? - YouTube

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