As your construction business grows, so do the risks, responsibilities, and moving parts. You may start wondering: “Should I split my business into separate companies?”
This is a common question for established construction companies, especially those juggling multiple services, developments, or sites. And the answer is: it depends.
In this article, we’ll walk through the pros and cons of splitting your business, when it makes sense, and how to get it right.
🏗️ What Do We Mean by ‘Separate Companies’?
Splitting your business into separate companies usually means forming one or more limited companies alongside your existing one. Each company might have its own:
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Bank account
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Profit and loss
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Tax responsibilities
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Management structure
Common examples include:
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Having one company for contracting/building work, and another for property development
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Keeping labour hire or plant hire under a different entity
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Creating a holding company and subsidiaries underneath
✅ Reasons You Might Split Your Construction Business
1. To Ring-Fence Risk
Construction comes with legal, financial, and on-site risks. If one part of the business faces a dispute or loss, separating it can protect the other areas.
For example:
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One company owns the assets (equipment or property)
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Another trades and deals with operational risk
This is especially useful for:
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High-value property development
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Specialist works (like scaffolding, civil engineering)
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Projects involving joint ventures or external investors
2. To Improve Tax Efficiency
Each company is taxed individually, which creates opportunities for:
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Managing profits separately
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Keeping one company below the VAT threshold
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Benefiting from small profits tax bands
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Charging management fees between companies
⚠️ Important: HMRC watches for artificial separation, so the setup must have commercial substance.
3. To Keep Accounts Clean and Focused
Separating entities makes it easier to:
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Monitor the profitability of different business lines
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Prepare for sale, investment, or succession
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Benchmark performance
It’s cleaner for reporting, especially when:
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You run multiple sites or regions
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You have different service offerings (e.g. main contracting, fit-out, and property holding)
4. To Prepare for Growth or Exit
If you plan to sell part of your business, bring in investors, or pass it to family, it’s easier when it’s already structured properly.
🚫 Reasons You Might Not Need to Split Yet
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You’re still relatively small and managing one clear operation
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It would complicate your admin, bookkeeping, and payroll unnecessarily
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You don’t have the time or support to manage multiple companies properly
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You’re not yet making enough profit to benefit from tax efficiencies
⚠️ What Are the Risks of Splitting?
Splitting the business can go wrong if:
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It’s done purely for tax avoidance (HMRC may challenge it)
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The structure isn’t properly documented or explained
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You lose focus managing multiple sets of accounts, staff, and systems
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You accidentally duplicate VAT or payroll obligations
This is where professional advice is essential. You need:
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A strong commercial reason
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The right legal agreements in place
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Proper accounting and tax support
💼 What’s the Right Structure for a Growing Construction Business?
There’s no one-size-fits-all answer, but common options include:
| Structure | When It’s Used |
|---|---|
| Single Ltd Company | Simple operations, early growth stage |
| Two Trading Companies | E.g. building and development split |
| Group Structure (Holding Co + Subsidiaries) | For asset protection, growth, succession planning |
| Special Purpose Vehicles (SPVs) | For individual property developments or joint ventures |
✅ How to Decide if You Should Split
Ask yourself:
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Are we taking on different types of work that carry different risks?
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Would separate accounts help us manage or grow better?
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Are we heading towards an exit, sale, or investment?
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Could we benefit from tax savings or risk protection with a new structure?
If yes, it’s worth exploring.
👋 Need Advice on Business Structure?
At Thomas Emlyn Ltd, we work exclusively with construction businesses, so we understand the risks, margins, and structure challenges you face.
We can help you:
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Assess if splitting makes sense
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Design the right company structure
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Set up new entities and manage HMRC compliance
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Keep all your finance reporting streamlined
📞 Book a discovery call today. It could save you tax and protect your business as you grow.
📌 Final Thoughts
Splitting your construction company into multiple entities can unlock major benefits—but only if it’s done for the right reasons, with the right structure, and the right advice.
If you’re not sure what’s best, don’t guess—get guidance.
