Buying property though a limited company SPV

Simon Misiewicz

Expat & Property Tax Specialist

30th June 2020

Should landlords buy property through a limited company?

It is essential to decide how to purchase a buy to let property in your name or buy a property through a limited company. We would suggest that landlords:

1 – Look at your current financial position of you and your spouse/civil partner

2 – Review what the financial income and tax position of your and your spouse/civil partner will be in the next five years

3 – Work out one structure’s tax savings against the buy to let mortgage interest costs of such an implementation. It would be best to consider the additional costs of using a limited company, such as bookkeeping and limited company accountancy services.

4 – If you are keen to leave your employment job in the next five years, then it might be better to buy the property in your name

5 – A limited company may be better for you if you and/or your spouse/civil partner remains a high rate taxpayer because of work or business activities. You do not need the money from your property investments.

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You might be interested in our property incorporation services to transfer your buy to let portfolio into a limited company written by our accountants for landlords. You ought to be comfortable answering the question, “how to you buy a house through your business?”

If you are unsure how to set up a property company, please ensure you read our article and get some support from a property accountant.

Please note that a Special Purpose Vehicle is called an SPV. We will refer to the term SPV throughout this article. All you need to know is that the SPV is a limited company that has been set up as a property company to purchase a residential property and/or a commercial property as an investment.

A limited company will have a Standard industrial classification of economic activities (SIC). The public uses these SIC codes to understand what the SPV is used for.

An SPV will have a SIC code on 68209 if it is to buy and rents a property. A property that flips property inside of an SPV will have a SIC code of 68100.

A property SPV can have multiple SIC codes 68100 and 68209. This does have many issues

– Banks want a property SPV to have either 68100 or 68209. Banks might not provide a buy to let mortgage to the property SPV with multiple SIC codes.

– HMRC will tax each property SPV with SIC codes differently for entrepreneurs relief (ER), now known as Business Asset Disposal Relief (BADR).

– Risk: You are potentially mixing up one property SPV that flips property with a property SPC that rents out residential properties. If a flip goes wrong, it could affect the buy to let investments. It is advisable to split out flips and buy to let investments with separate property SPVs.

Be sure to use our free online corporation tax calculator to see how much you need to pay to HMRC as a UK limited company owner.

Buying property though a limited company as a landlords

There are many reasons why landlords are buying property through a limited company. A limited company has a corporation tax rate of 19%. The 19% rate is much lower than the 40% for high-income taxpayers. It is also much lower than the 45% for additional rate taxpayers.

We see more landlords setting up a property company to save short- and long-term money.

If prosecuted, a property investment company risks its assets being taken away. However, the company’s shareholders can relax because their assets are not at risk. This is provided that they have not signed a personal guarantee. The other reason UK landlords use a limited company is to minimise risk. If there is a legal case against you as a sole proprietor, your assets could be at risk if found guilty, and you have to pay large sums of money to the claimant. Have you identified the critical advantage of owning a property investment company?

Buying property through a limited company (SPV) can be advantageous, and working with a property accountant is essential to get it right the first time for any landlord.

Should landlords use a property company (SPV) to save tax?

The sole aim of this article is to understand the pros and cons of buying property through a limited company as a landlord. We need to highlight why landlords like property SPV investment companies. A limited Company for property investment has financial benefits, but you need to consider the costs to get a balanced view.

How do landlords transfer rental property to a limited company?

We have written an article on how to incorporate your property portfolio into a limited company.

Book a call to see how we can help you.


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