The obvious conclusion from the Upper Tribunal decision is that every standalone company should form a dormant subsidiary, writes Robert Langston (Saffery Champness), but there are anti-avoidance rules to consider.
Case background
The facts of M Group Holdings Ltd v HMRC [2023] UKUT 213 are relatively straightforward. M Group Holdings Ltd was a standalone company which provided services to hospitals under NHS contracts. In 2015 there were a number of interested buyers in the company but potential tax liabilities made the company less attractive to those buyers.
M Group Holdings Ltd therefore incorporated a new subsidiary Medinet Clinical Services Ltd (MCS) to which it transferred its trade. M Group Holdings Ltd then sold MCS to the buyer. This is a normal structure to sell a ‘clean’ subsidiary to a buyer without the liabilities of the seller.
The transfer of the trade would have taken place on a...
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The obvious conclusion from the Upper Tribunal decision is that every standalone company should form a dormant subsidiary, writes Robert Langston (Saffery Champness), but there are anti-avoidance rules to consider.
Case background
The facts of M Group Holdings Ltd v HMRC [2023] UKUT 213 are relatively straightforward. M Group Holdings Ltd was a standalone company which provided services to hospitals under NHS contracts. In 2015 there were a number of interested buyers in the company but potential tax liabilities made the company less attractive to those buyers.
M Group Holdings Ltd therefore incorporated a new subsidiary Medinet Clinical Services Ltd (MCS) to which it transferred its trade. M Group Holdings Ltd then sold MCS to the buyer. This is a normal structure to sell a ‘clean’ subsidiary to a buyer without the liabilities of the seller.
The transfer of the trade would have taken place on a...
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