The short answer: opco, propco and your building
An opco/propco structure splits one business into two companies. The operating company, or opco, runs the care home: it holds the CQC registration, employs the staff, bills residents and councils, and carries the day to day trading risk. The property company, or propco, owns the building and leases it back to the opco for rent. Owners reach for this when they want the freehold protected from whatever might go wrong in the trade, or when they are thinking about a refinance or a sale.
The instinct is sound. A care home freehold is often the most valuable thing an owner has, and leaving it inside the trading company means it is exposed to every claim, contract and cash flow shock the home runs. The problem is the moving. If the building is already sitting in your opco, taking it out is a transaction, and HMRC taxes transactions. Get the structure right from the start and it costs almost nothing. Move a building that has grown in value and you can face a bill in the hundreds of thousands before the propco earns a penny of rent.
LOYALS is a King's Cross firm of accountants and business consultants that runs the finance function for care home owners and groups across London and the UK, so the framing here is the decision an owner actually has to make, not the textbook. If you want the wider picture of how we support the sector, our care home accountants page sets it out.
Why care home owners want the building held separately
There are three honest reasons to hold a care home building apart from the trade, and one bad one.
The first is asset protection. Care is a high risk trade: a safeguarding claim, an employment dispute, a bad debt from a slow paying council, or a period of low occupancy can all put the operating company under strain. If the freehold sits in a separate company, a problem in the opco does not automatically reach the bricks. That protection is only real if the two companies are genuinely separate, the lease is properly documented and the opco is not left starved of the cash it needs, but done properly it is the strongest reason to split.
The second is finance and sale readiness. Lenders often prefer to secure against a clean property company, and buyers frequently want to buy the trade without the real estate, or the real estate without the trade. A group that already separates the two gives you options a single company cannot. The third is succession: holding the building in its own company can make it easier to pass the property to family while someone else runs, or buys, the operation.
The bad reason is "to save tax". On its own, a propco saves nothing, and as you will see it can add cost through the associated companies rules. If someone is selling you a property company purely as a tax play, be careful. The value here is structural, not a rate cut, and it is worth talking through with a specialist in tax planning and advisory before you commit.
What it actually costs to move the freehold
Here is the part that surprises owners. When you move a property to a company you control, stamp duty land tax is charged on the market value of the property, not on the cash that actually changes hands. So even a transfer for no money at all, from you or from your opco into a new propco, is taxed as though the building had been sold at full price.
The good news for care homes is the rate. For stamp duty, a care home counts as non-residential property, because the law specifically excludes a home providing personal care by reason of old age or disability from the residential definition. That means the lower non-residential rates apply: nothing on the first 150,000 pounds, 2 percent to 250,000 pounds, and 5 percent above that. On a two million pound home that is about 89,500 pounds. The rule that charges it on market value regardless of what you pay is set out in HMRC's deemed market value guidance.
Stamp duty is only half of it. Moving the freehold out of the opco is also a disposal for corporation tax, at market value because the companies are connected. If the building has risen in value since you bought it, the gain is taxable. On a home bought for 1.2 million pounds and now worth two million, that is an 800,000 pound gain, and at the 25 percent main rate that is roughly 200,000 pounds of corporation tax. Add the stamp duty and you are looking at around 289,500 pounds to move a building you already own.
None of that is a reason never to split. It is a reason to do it early, deliberately, and inside the right structure, rather than shuffling a valuable freehold between companies on a whim.
Do it inside a group, or you pay twice
The way to avoid that 289,500 pound bill is to move the freehold inside a proper group rather than as a standalone transfer. If your opco and propco both sit under a holding company that owns at least 75 percent of each, two important reliefs come into play. Stamp duty group relief can remove the stamp duty on the transfer, and the no gain, no loss rule for group transfers can defer the corporation tax on the gain. Set up correctly, the same move that would have cost 289,500 pounds can cost close to nothing up front.
There is a catch, and it is a big one. If the propco leaves the group within three years of the transfer, both reliefs can be clawed back, and the tax you avoided becomes payable after all. So this only works if the group is genuinely long term, not a dressing up exercise before a quick sale. That three year window is exactly why the structure needs planning: get it wrong and you pay the full bill later, often at the worst possible moment.
There is also an ongoing cost that owners forget. Every company you control counts as an associated company for corporation tax, and associated companies share your tax thresholds. The 50,000 pound small profits limit and the 250,000 pound main rate limit are divided by the number of associated companies, so adding a propco halves them to 25,000 and 125,000. For an opco making 120,000 pounds of profit, that extra associate adds roughly 1,875 pounds a year to the corporation tax bill, as set out in HMRC's marginal relief guidance. It is not huge, but it is real, and it runs every year the structure exists.
The VAT trap on rent to your own care home
Once the propco owns the building it will charge rent to the opco, and there is a VAT decision hiding in that rent. Commercial property is exempt from VAT by default, so rent between your two companies is normally VAT free. A landlord can choose to opt to tax, which makes the rent standard rated at 20 percent, and for an ordinary commercial landlord that can be worthwhile because it unlocks VAT recovery on costs.
For a care home it usually is the wrong move. Your operating company makes mainly exempt welfare supplies, so it cannot reclaim VAT. If the propco opts to tax, the opco simply pays 20 percent more rent with no way to recover it, and the option to tax then normally locks in for 20 years. In almost every care home case, the right answer is to leave the property unopted and keep the rent VAT free. The rules sit in VAT Notice 742A on opting to tax. It is a small decision that quietly saves the group tens of thousands over the life of the lease.
What a propco does not change for CQC
One worry owners raise is whether moving the building affects their CQC registration. It does not. CQC registers the company that actually carries on the regulated activity, which is your operating company. A property company that only owns the building and collects rent does not provide personal care, so it does not need to register, and moving the freehold into it does not disturb the opco's existing registration. You can confirm the scope in CQC's guidance on who has to register.
This is actually one of the quiet advantages of splitting the property rather than the business. Because the propco sits outside the regulated activity, you get the asset protection and finance benefits without touching the registration that took so long to obtain. It is the opposite of a business transfer, where moving the trade itself into a new company would trigger a fresh CQC registration and all the delay that comes with it.
What sits in each company
If you do split, it helps to be clear from day one about what lives where. A clean opco/propco setup for a care home usually looks like this.
| What it is | Operating company (opco) | Property company (propco) |
|---|---|---|
| The freehold building | No | Yes, owns it and leases it out |
| CQC registration | Yes, carries on the regulated activity | No, provides no care |
| Staff and payroll | Yes, employs the whole team | No, or a single director |
| Resident and council income | Yes, bills and collects | No, receives rent from the opco |
| Trading risk | Yes, sits here by design | Ring fenced from the trade |
| Bank lending on the property | Guarantor at most | Yes, borrows against the freehold |
The lease between the two is not a formality. It should be a real, arm's length agreement with a sensible rent, because that rent is what shifts profit from the opco to the propco and what a lender and a buyer will scrutinise. Get the rent wrong and you either strand profit in the wrong company or hand HMRC a reason to ask questions.
What this means for you: what to do before you split anything
If you are weighing up an opco/propco structure for your care home, the practical steps are straightforward.
- Value the building and find its base cost. The gain, and therefore the corporation tax exposure, turns on what you paid versus what it is worth now. That single figure decides how expensive a move would be.
- Decide whether it is a group or a one off. A standalone transfer is taxed in full. A move inside a 75 percent group can defer the tax, but only if the group is genuinely long term and clears the three year window.
- Model the associated companies cost. Work out what the extra company adds to your corporation tax each year, so you know the ongoing hurdle the structure has to clear.
- Leave the property unopted for VAT unless there is a clear reason not to, so your care home is not paying irrecoverable VAT on its own rent.
- Document the lease and the intercompany rent from day one, and run both companies with clean monthly accounts, because a lender or buyer will look straight at them.
Done at the right time and inside the right structure, holding your care home freehold in its own company protects your most valuable asset and gives you room to refinance, sell or pass it on. Done as a rushed transfer it is just a large tax bill. This is a decision worth an hour with someone who will model the cost on your numbers first. LOYALS is a King's Cross firm of accountants and business consultants that sets up and runs care home groups across London and the UK, from the property structure and intercompany rent to the monthly management accounts, and our care home accountants team would rather tell you to wait than sell you a structure you do not need.