UK Holding Companies

A good reason to relocate to the UK is to take advantage of the UK company as a highly tax efficient investment holding structure for the receipt of foreign dividends. When setting up a UK holding company, Sovereign will consider individual client requirements and circumstances before proposing a solution, but the following considerations will generally apply.

The distribution exemption applies to dividends received by a UK holding company from a qualifying overseas company. The conditions are different depending on the size of the UK holding company but typically there will need to be a double tax agreement (DTA) between the UK and the country in which the company paying the dividend is resident. If the exemption applies, then there will be no UK tax imposed on the dividend.

UK holding companies can elect, under the Foreign Branch Exemption, to treat all the profits and losses of trading by their overseas branches as being taxable in the relevant overseas jurisdiction only, rather than being taxable in the UK.

The Substantial Shareholdings Exemption (SSE) rules also provides an exemption from capital gains for disposals of shares by companies that meet certain conditions. If a UK holding company owns a group of trading subsidiaries (at least two) and one of these is sold, the resulting capital gain arising should not be subject to UK tax.

The UK does not impose withholding taxes on the distribution of dividends to non-resident shareholders, whether individuals or companies.

The UK does not charge capital gains tax (CGT) on the sale of shares in a holding company situated in the UK by non-residents. Therefore, if the holding company is itself disposed of by non-UK owners (either individuals or corporate) there is no exposure to UK CGT. The one exception is if the UK company is property rich; then CGT will likely apply.

The combination of the UK’s DTA network and attractive holding company regime, together with the good reputation of UK companies worldwide, represent compelling reasons for using the UK to establish an international headquarters. This can prove hugely beneficial when considering business expansion worldwide.