Readers' forum : Group concerns

A group consists of a holding company and four wholly owned subsidiaries. Each subsidiary is in the same business and will be developing a trade on separate sites. In about two years these will make standard-rated supplies. In the meantime the holding company will make management charges to the subsidiaries. Everything will be on a commercial basis. The first stage will be to register the group to recover input tax as intending traders. Are there any pitfalls to consider?

The capital needed to develop the four subsidiaries’ trades is considerable. It is possible or perhaps necessary that the whole group would be sold on to a third party before any taxable supplies are made. However it is also possible that the holding company will wish or need to sell one or more subsidiaries or even all four before any taxable supplies are made.

If the...