Holding Company

[dnorts6]

Hi,

Holding Company (Co H) owns Co A & Co B.

Am I right to assume that Co A & Co B pay their Corporation Tax as normal like any other company does based on their profits. Does Co H need to submit a corporation tax form, and subsequently pay and CT due?

Thank you in advance for any repsonses

[Incredulum]

If H is dormant then it need not prepare a return.

Bewre the number of associated companies when it comes to calculating tax. http://www.hmrc.gov.uk/manuals/ctmanual/ctm03580.htm

[dnorts6]

The holding company would not have any transactions apart from dividends paid from the two companies. Therefore, this isn't a dormant company.

Sorry to be so naive on the subject, but does the holding company pay tax on the dividends received?

[Incredulum]

If in receipt of dividends it is not dormant, so needs to file a corporation tax return.

No, it doesn't pay tax on dividends received - they've already been taxed. An individual in receipt of dividends paid by Holdco would have to pay an extra 20% tax, of course.

It's tax computation therefore looks like:

Profit before tax........................ 100
Less dividends from UK companies ...(100)
Profits chargeable to corporation tax .nil.

Ensure it does not get counted as an associated company, per my link above.

[dnorts6]

Thank you.

From your example, I assume that your profit of 100 would have arrived from producing consolidated accounts based on CoA and CoB (the 2 subsidaries of HoldCo)?

[Incredulum]

No, from the dividend!

The profit and loss account looks like this:

Dividends received 100
Other income.......nil
Profit before tax...100