How to Transfer Assets Between Parent and Subsidiary Companies in the UK

Business groups often move assets between parent and subsidiary companies as part of restructuring or preparing for future investment or sale. While these are internal transactions, they still come with legal and tax consequences. Mistakes in the transfer process can lead to unexpected liabilities, regulatory issues, or even disputes between directors and shareholders.

Even where ownership ultimately sits with the same group, the legal obligations of each company remain separate. That means each entity’s directors must be able to justify the transaction in the best interests of their own company, not just the group overall.

Why Transfer Assets Between Parent and Subsidiary Companies?

Companies may transfer assets for several reasons. The most common often involve protecting intellectual property, simplifying group structures, or preparing part of the business for sale.

While transactions between connected parties may not involve cash changing hands, they still need to follow legal and regulatory frameworks. The relationship between a parent and its subsidiary does not exempt either party from scrutiny or the need for clear documentation.

Legal Methods for Transferring Assets

There are several ways to transfer assets between group companies. The most appropriate method will depend on the asset type, the purpose of the transfer, and the wider group structure.

Common methods include:

1. Sale or assignment of assets: Assets such as equipment, vehicles, or intellectual property can be transferred under a sale agreement, even if the consideration is nominal. This ensures both parties record the transaction formally.
2. Declaration of trust: A parent company may hold assets on trust for a subsidiary, or vice versa. This approach may be useful where there are timing or regulatory constraints.
3. Asset purchase agreements: These formal documents set out which assets are being transferred, when, and under what terms. They help ensure clarity and reduce the risk of disputes.

It’s also important to ensure any licenses, contracts, or leases associated with the asset are assigned correctly, with third-party consents if required.

Tax Considerations When Transferring Assets Between Parent and Subsidiary Companies

Tax treatment is one of the most significant considerations when transferring assets between group companies. While certain intra-group transfers are eligible for reliefs, this is not automatic.

Key issues to consider include:

• Capital gains: Intra-group transfers may qualify for tax deferral, but the rules are strict. Failure to meet the criteria can trigger immediate tax liabilities
• Stamp duty: Transferring land or shares may attract stamp duty, though reliefs can apply under group relief rules
• VAT: Transfers of business assets may be treated as a transfer of a going concern (TOGC), which can allow for VAT-free transfers, if the criteria are met
• Accounting treatment: Accurate valuations and clear documentation help ensure that the transfer is properly reflected in group accounts

Professional advice is strongly recommended, as mistakes can be costly and hard to reverse.

Legal Support for Asset Transfers

At mlplaw, our Corporate team advises UK businesses on structuring asset transfers across group companies. We ensure that agreements are watertight, risks are minimised, and commercial objectives are met. Whether you’re simplifying your structure or planning for future growth, we’ll help you move forward with confidence.

To speak to our Corporate team about transferring assets between parent and subsidiary companies, call 0161 926 9969 or email corporate@mlplaw.co.uk.