What are the benefits of a holding company?
A holding company can be a really useful structure for business owners who are looking to scale something much bigger than one stand-alone company. Now for me, the main benefit of a holding company is that it allows you to move money around your various businesses more freely.
Without a holding company, generally what you would do to move money around your businesses is either loan money between your two companies—which causes cash flow problems and also connects them from a risk perspective—or you would draw the money out personally via a dividend and then invest it via a director's loan, which is not tax-efficient at all.
With a holding company, it allows you to move money from a trading company up to a holding company, and then into another trading company or into an investment company, with no tax charge at all.
Another major advantage is it reduces risk. If you separate your cash or assets into a separate holding company or into separate businesses, then if your trading company was ever to run into any problems—if it was sued or had to pay some money to someone for something—you want your money and your assets to be held elsewhere so that they are protected.
Finally, a holding company can provide access to additional tax reliefs, such as the Substantial Shareholdings Exemption (SSE). That means that if you were to ever sell your trading company in the future, the gain—the profit on the sale—would be completely exempt from any tax charge at all, as long as the structure is set up correctly.
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