A SPV (Special Purpose Vehicle) Limited Company is a special company type that can be used to purchase buy-to-let property. As a rule, SPV companies are used only for buy-to-let, and do not carry out other forms of trading, which is why buy-to-let lenders who offer mortgages to Limited Companies usually require them to be a SPV – because that makes them easier to understand (because there is no other business activity to consider), and less risky. Put simply, a SPV is a company which has a “Special Purpose” of owning and renting out property.
Recent changes to the law on buy-to-let property are leading more people to investigate whether an SPV would be worthwhile for them, particularly those who find themselves in the situation where they could end up paying more in tax than they make in profit from their rental property.
Why set up a SPV?
- Potentially there are tax benefits to doing so. This will very much depend on your personal and business tax affairs, but luckily Horner Downey can offer expert advice on whether this is likely to be a tax-efficient strategy for you as an individual.
- It can offer businesses an excellent way of re-investing profits that they don’t want to declare as dividends. The initial set up can be complex, to create the relationship between the existing company and the SPV company, but again, don’t worry – we can help!
- Potentially setting up a SPV can help you secure a BTL mortgage. A great source of information of this is Neil Soundy’s SPV blog.
Tax implications of a SPV
As noted above, the tax implications of setting up a SPV to invest in BTL property can be complex, and can involve some or all of the following tax considerations:
- Corporation tax will be payable by the SPV, on the profits from rentals and on the profits if the property is sold
- Stamp duty will be payable if the assets being transferred to the SPV are already owned
- Capital gains may also be due
- If the SPV is linked to another business, consideration will have to be given to a special dividend
- Entrepreneurs relief may be due if properties are sold
Horner Downey can help you decide if setting up a SPV is the right step for you, and help guide you through the process.