The moment a dental owner moves from one company to two, the tax arithmetic changes. A single practice company is a self-contained unit: it earns profit, pays corporation tax, and the owner extracts the rest as salary and dividends. A group, where a holding company sits above two or more practice companies, opens up genuine advantages (loss sharing, exempt internal dividends, ring-fencing risk) but also one trap that catches almost every multi-practice owner off guard. The corporation tax thresholds that decide your rate are split between your companies, so the same total profit can attract more tax inside a group than it would in a single company.
This guide walks through the mechanics that change once you hold more than one company: the associated-companies division of the marginal-relief limits, why dividends between group companies are usually tax-free, how trading losses can be shared, and the correct (and surprisingly narrow) scope of the section 455 charge on inter-company funding. Figures here are stated for the 2026/27 tax year.
Typical dental group structures
Most dental groups operate through a holding company that owns the shares in individual practice companies. A common shape is a holding company owning the whole of two or three trading practice companies, with the freehold premises sometimes held in a separate property company below or alongside the holding company. The structure gives limited-liability separation between practices, isolates the risk of one site from the others, and creates a natural home (the holding company) for retained profit, property and future acquisitions.
It also creates the need to move money around: profit earned in a busy practice may need to fund a quieter one, finance an acquisition, or accumulate at the top for investment. The two main routes are inter-company loans and dividends, and the tax treatment of each turns on the rules below.
The associated-companies trap: divided marginal-relief limits
This is the single most important point for any dental group, and the one most often missed. Corporation tax has three bands. Profits up to a lower limit are taxed at the small-profits rate of 19%; profits above an upper limit are taxed at the main rate of 25%; and profits between the two limits are taxed at 25% with marginal relief, which produces an effective 26.5% rate on the slice of profit inside the band. For a standalone company the lower limit is £50,000 and the upper limit is £250,000.
For a group, those limits are divided by the number of associated companies (counting the company itself). Two associated companies share the limits in half; three split them in thirds. The thresholds at which each company starts paying 25% (and the 26.5% marginal rate) therefore fall sharply, so the same overall profit can sit in a more expensive band than it would in a single company.
| Number of associated companies | Lower limit (each company) | Upper limit (each company) |
|---|---|---|
| 1 (standalone) | £50,000 | £250,000 |
| 2 | £25,000 | £125,000 |
| 3 | £16,667 | £83,333 |
| 4 | £12,500 | £62,500 |
An illustrative comparison shows the effect. Take an owner with two practice companies, each making £40,000 of taxable profit (£80,000 in total). As a standalone company, £40,000 sits entirely below the £50,000 lower limit, so all of it is taxed at 19%. Once the company is one of two associated companies, the lower limit for each falls to £25,000: the first £25,000 is taxed at 19% and the remaining £15,000 falls into the marginal band at an effective 26.5%. Across the two companies the group pays more tax on the same £80,000 simply because the limits were halved. The lesson is to model the corporation tax cost of an extra company before incorporating a second practice, not after.
Two practical points. First, the count is of associated companies, broadly those under common control, including a property company or a dormant company you may have forgotten, and certain overseas companies. A dormant company with no activity is generally ignored, but an active property company is not. Second, the limits are also time-apportioned for accounting periods shorter than twelve months. For the underlying rate mechanics, see our guide to corporation tax rates for dental practices.
Inter-company loans
An inter-company loan lets one group company lend to another, often when a profitable practice funds a newer or loss-making site, or when the holding company channels cash down for working capital or an acquisition. The advance itself is not income to the borrower and not a deduction for the lender, so moving the principal between companies does not create a corporation tax charge on either side.
Interest and the loan-relationship rules
Where interest is charged, it is taxed under the loan-relationship rules (CTA 2009 Part 5): the lender brings the interest received into charge, and the borrower gets a corresponding deduction where the borrowing is for the purposes of its trade. In a wholly-owned group the two sides usually net to broadly nil across the group, which is why many groups keep genuine inter-company funding interest-free or at a modest rate by agreement. Transfer-pricing rules can require an arm's-length rate, but the UK has an exemption for most small and medium-sized enterprises, so a typical owner-managed dental group is often outside the formal transfer-pricing regime. The practical discipline that matters more is documentation: a written loan agreement, board minutes, and the balance recorded consistently in both companies' accounts.
Section 455 applies to participators, not to ordinary group loans
A frequent and costly misunderstanding is that any inter-company loan triggers the section 455 charge. It does not. A dental company is a close company, and section 455 charges the company tax on a loan made to a participator (broadly a shareholder or director, and their associates) that is still outstanding more than nine months and one day after the period end. The rate tracks the dividend upper rate: it is 35.75% for loans made on or after 6 April 2026 (33.75% for loans made in 2025/26). An ordinary commercial loan from one group company to another group company is not a loan to a participator, so it does not engage section 455 at all.
Where section 455 does bite is when money leaves the group and lands with an individual: drawings taken ahead of declared salary or dividend, leaving an overdrawn director's loan account, or a loan routed through a company to an owner. The charge is temporary and recoverable once the loan is repaid (section 458 relief), but the relief is deferred until nine months and one day after the end of the period in which repayment happens. Keep the distinction clear: company-to-company is governed by the loan-relationship rules, company-to-owner can fall into section 455. Our detailed guide to the overdrawn director's loan account covers the participator side in full.
Dividends between group companies
Dividends are the other route for moving profit up to the holding company, and for UK groups they are usually the cleaner one. Under the distribution exemption (CTA 2009 Part 9A), dividends received by a UK company from another UK company are generally exempt from corporation tax in the receiving company. A subsidiary practice company can pay a dividend up the chain to the holding company with no further corporation tax cost, because the profit was already taxed at the subsidiary before the dividend was declared.
Two conditions sit behind this. First, the subsidiary can only declare a dividend out of distributable reserves, which is broadly its accumulated realised profit after tax. A practice that has been loss-making (perhaps after an acquisition or a heavy fit-out) cannot pay a dividend until it has rebuilt positive reserves, regardless of its cash position. Second, the distribution must fall within one of the exempt classes in the legislation, which for ordinary dividends between UK group companies is straightforward to satisfy. The result is that dividends are typically the most tax-efficient way to concentrate profit at the holding company for reinvestment or onward acquisition.
Group relief: sharing trading losses
One genuine advantage of a group is the ability to share losses. Group relief lets a trading loss made by one company be surrendered to another company in the same 75% group and set against that company's taxable profit for a corresponding accounting period. In a dental group this is valuable when one practice runs at a loss (a squat practice in its ramp-up phase, or a recently acquired site absorbing integration costs) while an established practice is profitable: the loss can shelter the profitable company's tax rather than being carried forward inside the loss-making company.
The 75% test looks at beneficial ownership of ordinary share capital and entitlement to profits and assets on a winding up. A standard holding-company-over-wholly-owned-subsidiaries structure meets it comfortably. The relief works period-by-period, so the timing of the loss and the profit needs to align, and a formal claim is made in the recipient company's corporation tax return. Group relief is one of the reasons a deliberate group structure can be worth its administrative overhead once you operate more than one practice.
Intra-group transfers and property
Groups also benefit from reliefs when assets move between members. Transfers of chargeable assets (such as goodwill or a property) between companies in a 75% group are generally treated as taking place on a no-gain, no-loss basis for corporation tax, so an internal reorganisation does not crystallise a capital gain at the point of transfer. Where the asset is land or buildings, SDLT group relief (and the equivalent reliefs for the devolved land taxes) can remove the stamp duty charge on an intra-group property transfer.
These reliefs carry a clawback. If the company that received the asset leaves the group within three years while still holding it, the relieved gain or the relieved SDLT can be brought back into charge. This matters when a group is being prepared for sale: moving a freehold into a property company shortly before selling a practice company can trigger a degrouping charge if the timing is wrong. Plan intra-group moves with the eventual exit in mind, not in isolation. For the wider picture on holding multiple sites, see our overview of dental group structures across multiple sites.
Each company is still a separate entity
A group is a tax concept layered on top of separate legal companies, not a single merged business. Each company keeps its own accounting records, files its own corporation tax return, and meets its own Companies House obligations. Treating the group as one pot, paying expenses of one company from another without recording the inter-company balance, or declaring dividends without checking each subsidiary's distributable reserves, are the errors that cause problems later. Management charges, inter-company rent and shared-cost recharges should each be documented and recognised consistently in both companies.
Bringing it together
For a dental group the headline planning points are clear. The associated-companies rule divides your marginal-relief limits, so an extra company can raise the group's effective corporation tax rate: model this before adding a practice company. Dividends move profit up to the holding company free of further corporation tax under the distribution exemption, provided each subsidiary has the reserves to declare them. Group relief lets a loss in one company shelter profit in another. Ordinary inter-company loans are governed by the loan-relationship rules and do not trigger section 455, which is reserved for loans that reach a participator. And intra-group transfers of assets and property carry valuable reliefs that can be clawed back if a company leaves the group within three years.
If you are funding an acquisition or restructuring how your practices sit together, the financing route interacts with all of this. Our guide to practice acquisition financing options covers how borrowing fits alongside the group structure. Group tax is an area where the interaction of corporation tax, the close-company rules and company law means small structuring decisions have large consequences, so it is worth modelling the whole picture before you move money or add a company.