Who this is for: For founders with multiple entities who are moving capital between companies and want to understand the tax-efficient route.
A holding company that accumulates profits has capital available for deployment. The question is how to deploy it without triggering personal tax.
Intercompany loans are one of the primary mechanisms. A holding company can lend capital to a subsidiary or to a new trading company at a commercial rate of interest. The subsidiary uses the capital to fund operations, acquisitions, or investments. The interest payments flow back to the holding company as income, taxed at 25% corporation tax.
Why the terms must be commercial
HMRC's transfer pricing rules require that transactions between connected companies are conducted on arm's length terms. This means the interest rate on an intercompany loan must be comparable to what an unconnected lender would charge.
A loan at 0% interest between connected companies is not arm's length. HMRC can impute a market rate of interest and tax the holding company as if it had received that interest. The subsidiary may also be denied a deduction for the imputed interest.
The practical implication is that intercompany loans should be documented with a formal loan agreement, at a commercial rate of interest, with repayment terms that reflect the purpose of the loan.
The tax efficiency
The tax efficiency of intercompany loans comes from the combination of the interest deduction in the subsidiary (reducing its taxable profits) and the interest income in the holding company (taxed at 25% corporation tax rather than 45% income tax).
For a founder who would otherwise extract capital personally and lend it to a new venture, the intercompany loan route saves the dividend tax on the extraction and the income tax on the interest received personally.
Capital that moves between group companies without leaving the structure is capital that is not being taxed at personal rates.
What the structure enables
A holding company with accumulated capital can fund new trading ventures, property acquisitions, or financial investments through intercompany loans, without the founder ever extracting the capital personally. The capital stays inside the Private Capital Engine, compounding at corporate rates, available for redeployment when the next opportunity arises.
What This Looks Like for Your Numbers
The structures described in this article are not theoretical. They are the architecture that founders at the £500k+ profit level install to stop capital leaking into the personal tax system. The audit maps your current position and shows you the specific gap in your numbers.
The audit is free. The Discovery Call is a 30-minute working session where Alex maps your specific position. The £500 is credited in full against the Capital Architecture.
Capital Deployment Is Architecture
Intercompany loans are a Growth-layer tool. They enable capital to move between group members without triggering personal tax. Any competent restructuring adviser can implement them.
What intercompany loans do not provide is a governance framework for how capital is allocated across the group, which entities receive capital, on what terms, at what interest rate, and under what conditions. Without that framework, intercompany loans are a tax mechanism. With it, they are a capital allocation architecture.
The Expansion layer is the constitutional architecture that governs how capital moves across the group, investment mandates, intercompany lending frameworks, and governance mechanisms that ensure capital is deployed to its highest use without leaking through unnecessary tax events or governance disputes at every step.