Holding property in a special purpose limited company is tax efficient. Once you establish your SPV company, finance options become readily available. The UK mortgage lenders are keen to provide financing for precisely this type of companies.
An SPV is short for a “special purpose vehicle”, a limited company set up at Companies’ House specifically to hold property. It can be just one property in particular, or maybe you intend to keep all of your buy-to-let properties in a single limited company. It is increasingly popular choice among landlords. In 2020 there have been 41700 registrations of this type of businesses, a 23% jump from the 2019 level.
Your special-purpose limited company properties can include HMOs, new builds, refurbishment properties and student accommodation.
Mortgage lenders typically lend up to 85% loan-to-value. A loan-to-value of 75% or less leads you to better rates. The rates of interest depend on the bank of England base rate or LIBOR.
SPV legally has limited liability as it is a separate entity. But almost every mortgage lender on the market will require that the directors or shareholders provide personal guarantees for SPV.
Keeping in mind such exposure limits, we recommend using more than one lender to access the best possible terms.
After 2015 changes in landlords’ taxation, companies became a more popular way to hold real estate. How can a person transfer property to SPV?
Lenders allow gifting the equity by way of a director’s loan—this way, the limited company does not have to stump up a deposit to buy the property. You may have to pay capital gains tax and stamp duty personally, so please seek an account’s advice first.
Buy to let mortgage lenders typically lend to an SPV limited company because it is set up for a single task – to let. Lending to a trading company is more complicated and less profitable.
Many of the high street banks will only lend if you are purchasing a property in your own name. This is why SPVs get finance from specialist buy-to-let lenders.
Foundation of a buy-to-let SPV
We shall register a limited company for you with a certain specified business type and using one or more of these SIC codes:
- 68100: Buying and selling of own real estate;
- 68201: Renting and operating of Housing Association real estate;
- 68209: Other letting and operating of own or leased real estate;
- 68310: Real estate agencies;
- 68320: Management of real estate on a fee or contract basis.
Transferring your buy to let’s form personal name to limited company name can be tax efficient in the long term. To ensure that paying the capital gains tax and stamp duty offset the income tax saving in the long run, please consult with us.
ORACLE CAPITAL GROUP is an investment and real estate development consultancy specialising in residential and commercial property projects. Our experience includes successfully completed projects in commercial property, leisure, hospitality, retail and student accommodation. We provide accountancy and tax services for buy-to-let companies.
Head of Investments