A guide to buy to lets as a Special Purchase Vehicle (SPV) - InvestGrow Financial Services

Are you looking to buy and manage buy-to-let properties? If so, using an SPV (Special Purpose Vehicle) may be a good option. SPV’s isolate the risk during the funding and purchasing of properties because the company has its own legal status, assets and liabilities, and can hold multiple properties which allows landlords to expand a property empire quickly.

What is an SPV?

An SPV, or Special Purpose Vehicle, is a generic name for a legal entity that is created for a limited or defined purpose. Within property investment they are formed for purchasing and holding residential buy to lets or for property development.

Usually, when you invest in a property, the buy to let mortgage is in your own name. When you buy a property through a SPV limited company (a small business set up in your name), the company owns the property instead of you. Therefore, the mortgage is taken out in the company’s name. You pay money into the SPV company, which can be used as a deposit for properties; a limited company buy-to-let mortgage can be used to cover the rest of the properties price.

What are the benefits of an SPV?

Since it is a company, an SPV will have its own assets and liabilities. This has the benefit of allowing investors to apply for a mortgage as a business, rather than as an individual. One of the most popular reasons for using an SPV for property investment is tax. Both income tax and capital gains tax (CGT) positions can be improved when within an SPV.

The benefits include: 

  • Tax relief on mortgage interest
  • Lower tax rates on profits
  • Transferring ownership to reduce Inheritance Tax
  • Limited liability and increased credibility
  • Quickly expand your property portfolio
  • If you make a personal investment into the SPV limited company it is possible to draw your investment back out of the SPV in the form of a director’s loan
  • Isolated financial risks as the SPV operates as its own entity

Another benefit worth mentioning is that many mortgage providers tend to grant more generous mortgages than they would for an individual, making it easier for investors to borrow more and expand their property portfolio, all the while keeping the SPV separate from their personal affairs.

As the owner of a SPV limited company, there are specific reporting duties and filing deadlines you must adhere to on an ongoing basis. For example, you have a legal obligation to file your annual accounts with HMRC and Companies House.

For further advise and a guide on buy to lets as a special purchase vehicle, please contact us here.

 

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