How To Set Up An SPV Limited Company For Buy-To-Let

Appoint Directors and Shareholders

Assign at least one director to manage the company. Shareholders (who can also be directors) are the owners of the company.

Define the Business Activity with SIC Codes

Standard Industrial Classification (SIC) codes define your company’s business activities. For a property rental business, relevant SIC codes include: – 68100 – Buying and selling of own real estate – 68209 – Other letting and operating of own or leased real estate – 68320 – Management of real estate – 68201 – Renting and operating of Housing Association real estate

Prepare the Memorandum and Articles of Association

These documents outline the company’s constitution and governance structure. Standard templates are available, or you can draft custom versions to suit your needs.

Register for Corporation Tax

After incorporation, register your company with HM Revenue & Customs (HMRC) for Corporation Tax within three months of starting any business activity.

Open a Business Bank Account

Set up a dedicated business bank account to manage the company’s finances separately from personal funds

Considerations

Tax Implications

Operating through an SPV can offer tax advantages, such as the ability to offset mortgage interest against rental income. However, it’s essential to consult with a tax advisor to understand the specific implications for your situation.

Mortgage Accessibility

Many lenders offer buy-to-let mortgages to SPVs, often with more favourable terms compared to individual landlords. Lenders typically prefer SPVs due to their straightforward structure and clear business focus.

Administrative Responsibilities

Running a limited company entails ongoing administrative duties, including filing annual accounts, submitting confirmation statements, and maintaining accurate financial records.

What are the tax advantages of buying a rental property through a Special Purpose Vehicle (SPV) limited company compared to buying in your personal name?

A good starting point is to consult a qualified tax professional, given that mortgage advisors cannot provide specific tax guidance. The typical reason people seek help in finding a mortgage through an SPV or limited company is to benefit from the tax differences when submitting an annual tax return.

In many scenarios, standard income tax rates are replaced by dividend tax bands, which may allow you to retain a higher proportion of your rental yield.

We work alongside qualified tax professionals who can help you understand what may be appropriate for your personal circumstances and outline the potential implications for your overall liabilities.

Additionally, for long-term considerations such as Stamp Duty, capital gains, and inheritance tax, getting the right advice is the first step in your property investment journey.

Can you transfer existing Buy to Let properties into an SPV, and what are the costs involved?

Yes, you can; however, the transaction is often not as simple as just changing the ownership.

A simple transfer is essentially the same principle as buying or selling to somebody else.

Because this counts as two separate transactions – a personal sale and a company purchase – you will need separate legal representation for each, resulting in two sets of solicitor fees.

An SPV will often attract a higher rate of Stamp Duty, and there could also be a personal liability for Capital Gains Tax to consider. It is worth noting that your existing lender might not offer mortgages to a limited company or an SPV and they might not permit the transfer. This could mean paying fees, known as early repayment charges, to exit your current mortgage.

There are, however, some notable exceptions to these typical expenses, particularly when transferring multiple properties simultaneously.

While we are not authorised to give tax advice, we can put you in touch with a trusted partner who can help you understand the right approach for your situation.

How do SPV mortgage rates compare to personal Buy to Let mortgage rates?

Often, the rates are very similar and sometimes can even be lower. An important consideration is that it is common to have higher set-up costs for an SPV.

Lender fees can be higher, and while surveyor and solicitor costs are often absorbed by the lender for personal mortgages this is not usually the case for SPVs.

Is it worth setting up an SPV if you only plan to own one or two rental properties?

This really depends on your personal situation and the numbers involved. Mortgage rates might be similar for both, but the set-up costs can vary significantly between mortgage lenders. The tax implications would generally be the biggest consideration.

Further to our earlier point, we are not permitted to deliver tax advice. We can, however, connect you with a trusted professional to help determine the right approach for your circumstances.

Can you use an SPV to build a larger portfolio, and are there limits on how many properties you can hold?

Absolutely, and this remains the default strategy for clients looking to scale portfolios of all sizes. While some lenders impose a cap on the number of properties you can hold, others offer unlimited scope.

An experienced advisor can assess your current circumstances to help identify lenders that may suit your long-term investment strategy.

Let’s Get Your Special Purpose Vehicle (SPV) Started

Whether you’re just exploring your options or ready to buy your first property through a limited company, we’re here to help. Book your free consultation, and we’ll advice you on the right company structure.

FEES MAY APPLY AT A LATER STAGE