A group structure means a holding company that owns one or more trading companies, rather than everything sitting in one limited company.
In construction it is usually done for one of three reasons. Protecting property from the trade, ring fencing risk between contracts, or getting ready to sell part of the business.
Protecting the property
The most common reason we see. A construction business that has bought its own yard or unit, with the property sitting in the same company that takes on the contracts.
If a contract goes badly wrong, the property is exposed. Moving it into a separate company under the same holding company puts a legal line between the asset and the trading risk.
Moving a property that is already owned is not free. There is stamp duty land tax to think about and potentially a capital gain, though group relief can apply. It is a decision to take with advice and figures in front of you, not a tidy up.
Ring fencing contract risk
Some firms run separate companies for different types of work. Groundworks in one, fit out in another, or a specific large contract in its own vehicle.
The benefit is that a failure in one does not automatically take the others with it. The cost is more administration, more filings, and more places for CIS and VAT to go wrong.
Worth doing when the contracts are genuinely large relative to the business. Not worth doing to look bigger than you are.
Getting ready to sell
If part of the business is saleable and part is not, separating them years ahead makes the sale possible.
Buyers want to buy a clean trading company without the owner’s property, the classic car, or the second business attached to it. Untangling that at the point of sale is expensive and slow. Doing it three years earlier is neither.
What a group changes day to day
- CIS. Each company registers separately, verifies separately and files separately. Intercompany charges for labour can fall inside the scheme, which surprises people.
- VAT. You can register the group for VAT so intercompany supplies are disregarded, but that interacts with the reverse charge and needs thinking through rather than assuming.
- Accounts. More sets to file, and consolidated accounts once you pass the size thresholds.
- Losses. Group relief lets losses in one company reduce profits in another, which is often the practical benefit nobody mentioned at the outset.
When it is not worth it
Below about £1 million of turnover, with no property and no unusual contract risk, a group is usually more cost and complication than it is worth.
The administration is real. Three sets of accounts, three CIS registrations, intercompany balances that have to be reconciled, and a bookkeeper who now has to know which company each invoice belongs to.
Do it for a reason you can state in one sentence. If you cannot, it is not time yet.
Getting the structure right before you need it
Almost every group we set up would have been cheaper and simpler done two years earlier. Property is harder to move once it has grown in value, and a business is harder to separate once the contracts are mixed.
Have a look at how we handle group structures or book a call.