Companies may own one or more other companies which are its subsidiaries. The relationship between parent and subsidiary depends on majority control of the voting rights of shares or the ability to control the board of directors. A UK holding company is a company established for the sole or majority purpose of holding shares in the Groups subsidiary companies incorporated in countries in which the Group is engaged in business activities. The holding company will receive the dividends paid by those subsidiaries and use them to declare a dividend to the ultimate parent. Fides Partners Limited can assist you in forming your UK holding Companies. Below is our comprehensive package:

Registration of your company with companies house           £310

Some European jurisdictions provide very good tax incentive for incorporating in their country. The United Kingdom is a commonly used jurisdiction for the incorporation of a holding company. Some of the features which make it attractive are:

• One of the largest networks (over 100) of double taxation treaties
• EU member
• Reputable jurisdiction with excellent business infrastructure
• No restrictions on the movement of capital

The tax laws in the U.K. make the country an attractive location for holding companies.

• If the subsidiary is incorporated in an EU country and, if the EU parent / subsidiary Directive applies, dividends paid to a U.K. holding company will not suffer deduction for withholding tax in the country from which the dividend is paid. However some EU countries are currently introducing legislation to prevent abuse of this system.
• Where the directive does not apply the dividend may qualify for a reduced or nil rate of withholding tax under one of the U.K's many double taxation treaties.
• Incorporating a holding company in the UK can sometimes be more beneficial than in other jurisdictions. U.K law provides relief for foreign tax suffered, either by way of the EU directive or under the terms of a treaty or, where neither is available, unilaterally. The effect can be to eliminate any liability to U.K. corporation tax on the holding company.
• No withholding tax on dividends paid by the holding company
• Exemption from capital gains tax on the disposal of the shares in the subsidiary by the holding company.

Conditions for Incorporation of a Holding Company in the UK

In any country in which a holding company can be incorporated, there are various conditions which must be met, some of the main requirements are:

• The holding company must hold at least 10% of the ordinary share capital of the subsidiary for a continuous period of at least 12 months
• The holding company must be a trading company or a holding company of a trading group
• The subsidiary must be a trading company or the holding company of a trading group

It must be noted that according to legislation:

• A group is the principal company and its subsidiaries (at least 51% of shares owned directly or indirectly).
• There is a very broad definition of what constitutes trade and it includes almost every type of activity carried on with a view to profit. However in general, financial companies do not qualify.

Legal Form: A UK holding company can be incorporated either as a private limited company (Ltd) or a public limited company (Plc).

Share Capital: The minimum share capital for incorporation of a UK company is £50.000 for a public limited company of which at least 25% must be paid up, but no minimum is applied to a private limited company.

Taxation: A UK company is fully subject to tax at a normal rate of 30%. No capital duty is levied when capital is contributed at the formation of a resident company and on any increase in its capital. Corporate income tax is charged on worldwide profits of companies resident in the UK and is calculated based on financial statements prepared according to generally accepted accounting principles. Expenses incurred by the company must be only for the purposes of the trade.

Dividend Exemption: All dividends paid by a subsidiary to a UK parent company are subject to corporate income tax. However UK grants double tax relief by way of a credit for foreign corporation tax underlying the dividends provided that the UK Company holds, directly or indirectly, at least 10% of the share capital of the distributing company. If the foreign company is subject to a corporate tax rate of 30% or more, the credit will usually be a complete relief from UK corporation tax. Dividends received by a UK company from another UK company are exempt from corporation tax.