If your construction business is growing rapidly, expanding into new areas, or taking on larger, more complex projects, you might wonder if your current business structure is still fit for purpose. One increasingly common and strategic solution is forming a group structure.
But what exactly is a group structure, when should you consider one, and what benefits could it bring your construction business?
In this blog, we’ll clearly explain everything you need to know about setting up a group structure for your construction company, helping you make an informed decision about whether it’s the right move for you.
🏗️ What Is a Group Structure?
A group structure typically consists of:
-
A holding company (parent company)
-
One or more subsidiary companies owned by the holding company
In construction, subsidiaries might specialise in different services (e.g., contracting, property development, plant hire) or operate in different geographic regions.
✅ Why Consider a Group Structure for Your Construction Company?
Here are some compelling reasons why many construction firms adopt a group structure:
1. Protecting Assets and Minimising Risk
By separating trading activities across subsidiaries, you isolate risk:
-
If one subsidiary encounters financial or legal difficulties, your other companies remain protected.
-
Assets (property, plant, machinery) can be owned by a separate subsidiary, safeguarding them from operational risks.
2. Improved Tax Efficiency
A group structure can significantly reduce your tax burden:
-
Transfer profits efficiently between subsidiaries via dividends or management charges.
-
Utilise tax losses effectively across the group.
-
Reduce Corporation Tax liability strategically.
3. Clearer Financial Management and Reporting
Separating your business into distinct subsidiaries allows for clear, precise financial reporting, helping you quickly understand:
-
Which subsidiaries or business areas are most profitable
-
How effectively each business unit is performing
-
Where to allocate resources and investment strategically
4. Easier Growth and Scalability
A group structure makes it simpler to:
-
Add new subsidiaries as your business expands
-
Enter new markets or sectors without disrupting your existing business
-
Attract investment or partners into specific subsidiaries without diluting control over your main business
5. Preparing for Future Sale or Succession
Having a clear group structure makes your business more attractive and valuable if you’re considering selling or succession planning:
-
Easier for potential buyers to acquire specific subsidiaries
-
Allows you to retain ownership of some businesses while selling others
-
Makes management buyouts simpler and clearer
⚠️ When Might a Group Structure Not Be Suitable?
Despite the clear benefits, group structures aren’t right for every construction company. You might reconsider if:
-
Your business is small or simple enough not to justify the additional admin or complexity.
-
You don’t yet have significant assets or risks that justify asset protection.
-
The tax benefits are minimal or won’t outweigh the setup costs.
📋 How to Set Up a Group Structure (Step-by-Step)
If you’re ready to move forward, here’s how to do it clearly and effectively:
Step 1: Plan Clearly
-
Define exactly how many subsidiaries you need.
-
Clearly outline each subsidiary’s role, services, and structure.
Step 2: Form Your Holding Company
-
Register your new holding company with Companies House.
-
Clearly structure ownership: the holding company should own 100% of each subsidiary.
Step 3: Transfer or Create Subsidiaries
-
Transfer existing businesses/assets to subsidiaries (this may have tax implications, so seek advice).
-
Clearly document ownership, directors, and company structures.
Step 4: Implement Clear Inter-Company Agreements
-
Set clear management charges, dividend policies, and transfer pricing arrangements between subsidiaries.
-
Clearly document these agreements to comply with HMRC requirements.
Step 5: Regularly Review and Adjust
-
Ensure you conduct regular financial and tax reviews to optimise benefits and compliance.
🚫 Common Mistakes When Setting Up Group Structures
-
Poor documentation or unclear structures—leading to tax or compliance issues.
-
Overcomplicating your structure unnecessarily.
-
Not taking professional tax advice early, resulting in unexpected liabilities or missed opportunities.
-
Ignoring VAT and inter-company transaction complexities.
👷♂️ Real-Life Example: Benefits of a Group Structure
A construction client we supported operated a single limited company, mixing contracting, property development, and plant hire. They struggled with risk exposure, unclear profitability, and inefficient tax management.
We helped them set up a clear group structure with separate subsidiaries:
-
Contracting subsidiary
-
Development subsidiary
-
Plant hire subsidiary
-
Holding company owning property assets
Results:
-
Improved asset protection and risk management.
-
Reduced Corporation Tax by transferring profits efficiently.
-
Clearer financial visibility improved profitability significantly.
🛠️ Tools to Help Manage a Group Structure
-
Cloud accounting software (Xero, QuickBooks, Sage) for clear, integrated financial reporting.
-
Financial forecasting tools (Float, Futrli) to manage cash flow and profitability across multiple subsidiaries.
📞 Need Expert Help Setting Up Your Group Structure?
At Thomas Emlyn Ltd, we specialise in helping construction businesses set up clear, effective group structures tailored to their needs.
We’ll help you:
-
Design the optimal group structure clearly
-
Set up subsidiaries and holding companies efficiently
-
Manage inter-company agreements and transactions
-
Optimise your tax position strategically
📞 Book a discovery call and start protecting your assets, minimising risk, and maximising your profits.
📌 Final Thoughts
A well-structured group can transform your construction business, significantly reducing risk, increasing profitability, and making future growth or exit simpler.
Carefully consider your current business structure—if a group makes sense, get professional advice early to set it up right the first time.
