How to Set Up a Holding Company in the UK

Business Apr 11, 2025 27 Add to Reading List

Setting up a holding company in the UK can be smart for entrepreneurs, investors, and business owners looking to manage risk, streamline operations, or prepare for future expansion. Whether you're consolidating assets or acquiring new businesses, a holding company provides a flexible and tax-efficient structure.

In this article, we’ll walk you through the step-by-step process of setting up a holding company in the UK, from defining its role to completing legal requirements.

What is a Holding Company?

The holding company is a legal entity that owns shares in other companies (subsidiaries) but does not typically carry out any trading. Its primary role is to control, manage, and protect the assets and operations of those subsidiaries.

Step 1: Define the Purpose of Your Holding Company

Before forming the entity, be clear about your goals. Common purposes include:

Holding shares in multiple businesses
Protecting assets from operational risk
Facilitating acquisitions or investments
Tax planning and inheritance planning
Centralizing control while decentralizing operations

Step 2: Choose a Business Structure

In the UK, a holding company's most common legal structure is a private limited company (Ltd). This offers limited liability, a separate legal identity, and flexible tax planning options.

You can also consider:

Public Limited Company (PLC) – for larger entities planning to raise capital publicly
Limited Liability Partnership (LLP) – less common for holding purposes

Step 3: Choose a Company Name

Your holding company must have a unique name, not used by another UK company. You can check name availability on the Companies House website. Avoid names that suggest a regulated activity unless you’re properly authorized.

Step 4: Register the Company with Companies House

A registered office address (can be your accountant's or a virtual address)
At least one director
Shareholders and share capital information
Standard Industry Classification (SIC) code – for a holding company, use 64209 (“Activities of other holding companies n.e.c.”)

Cost: Registration costs from £12 to £100, depending on the method and speed.

Step 5: Set Up Corporate Bank Accounts

After incorporation, open a business bank account in the holding company's name. This is essential for receiving dividends, managing capital, or funding subsidiaries.

Step 6: Acquire or Form Subsidiaries

Your holding company becomes active once it owns controlling shares in other companies. You can do this by:

Purchasing a majority stake in existing companies
Setting up new subsidiaries and issuing shares to the holding company

Ensure all share transfers are properly documented and recorded.

Step 7: Understand Tax and Legal Obligations

While a holding company may not trade, it must still meet legal and tax responsibilities:

File annual accounts and confirmation statements to Companies House
Submit corporation tax returns if income is received (e.g., dividends, capital gains)
Register for VAT if applicable
Maintain proper records of subsidiaries, shareholdings, and financial activities

Step 8: Consider Group Structure and VAT Grouping

You can create a corporate group if your holding company owns multiple subsidiaries. This allows for:

Intra-group tax relief
Group VAT registration (no VAT on transactions between group members)
Easier capital allocation and reporting

Step 9: Set Up Proper Governance and Agreements

To operate efficiently and avoid legal disputes, establish:

A shareholders’ agreement
Clear intercompany loan terms
Defined reporting and decision-making structures

Seek advice from a legal or financial professional to ensure compliance and strategic alignment.

Step 10: Seek Professional Guidance

Setting up a holding company involves several legal, financial, and strategic considerations. It’s wise to work with:

An accountant familiar with group structures and tax planning
A solicitor for drafting agreements and ensuring regulatory compliance
A business advisor to plan for scaling and acquisitions

Conclusion

Forming a holding company in the UK is a powerful way to manage and grow your business empire. The benefits are numerous, from protecting assets to optimizing tax efficiency—but it requires careful planning and execution. Following the steps above and seeking professional advice can create a solid foundation for long-term success.