What is an SPV Company?
What Is an SPV Company?
An accountant's guide to Special Purpose Vehicle companies, including how property SPVs work, why buy-to-let investors use them, tax considerations, mortgages, SIC codes and whether an SPV could be suitable for your property investment.
In simple terms: an SPV is an entity created for a specific purpose. In UK property investment, the term commonly refers to a limited company established specifically to buy, own and let property.
What is an SPV company?
An SPV company (Special Purpose Vehicle) is a company established for a specific, limited purpose. In UK property investment, an SPV usually means a private limited company set up specifically to buy, own and let property, rather than carrying on a wider range of trading activities. Property investors commonly use SPVs for buy-to-let portfolios because the company creates a separate legal entity through which properties, borrowing, rental income and expenses can be managed.
What does SPV mean?
SPV stands for Special Purpose Vehicle. The term describes an entity created to carry out a particular activity or hold particular assets separately from other activities.
SPVs are used in many areas of business and finance, including property investment, property development, joint ventures, project finance and asset ownership. For most individual UK property investors, however, an SPV is simply a limited company whose main purpose is owning and letting property.
What is an SPV company for property?
A property SPV company is normally a limited company established specifically to purchase, hold and/or let property. Instead of buying a buy-to-let property personally, the investor buys shares in and controls a company, and the company purchases the property.
The company therefore normally receives the rental income, pays the property-related expenses and mortgage interest, owns the property and pays tax on its taxable profits.
Simple SPV example
Sarah wants to purchase a buy-to-let property. Instead of buying it personally, she forms Sarah Property Investments Ltd. Sarah owns the shares and is a director, but the limited company buys the property and becomes its legal owner.
The rent is received by the company and relevant property expenses are paid by the company. The company prepares annual accounts and a Corporation Tax return based on its activities.
SPV company vs a normal limited company
Legally, a typical property SPV is still a limited company. The main difference is that an SPV is deliberately kept focused on a narrow activity, whereas a general trading company may conduct a much wider range of business.
| Feature | Property SPV | General Trading Company |
|---|---|---|
| Legal structure | Usually private company limited by shares | Often private company limited by shares |
| Main purpose | Property investment or another defined purpose | General commercial trading |
| Activities | Normally deliberately restricted | May carry out several trading activities |
| SIC codes | Property-related codes commonly used | Codes relevant to its trade |
| Borrowing | May apply for specialist limited-company buy-to-let finance | Ordinary business finance |
| Accounts & tax | Company accounts and Corporation Tax return normally required | Company accounts and Corporation Tax return normally required |
How is an SPV company taxed?
A UK property SPV is generally subject to the normal corporation tax rules that apply to companies. The company calculates its taxable property business profits and pays Corporation Tax on those profits at the applicable rate.
This is different from owning rental property personally, where rental profits normally form part of the individual's taxable income and are subject to Income Tax.
| Issue | Property held through SPV | Property held personally |
|---|---|---|
| Rental profit | Generally subject to Corporation Tax | Generally subject to Income Tax |
| Mortgage interest | Generally dealt with under company tax rules when calculating taxable property profits | Finance cost relief for residential landlords is subject to specific restrictions |
| Sale of property | Company pays Corporation Tax on taxable gains | Individual may be liable to Capital Gains Tax |
| Taking profits personally | Potential further tax when money is extracted from the company | Rental profit already belongs to the individual |
| Administration | Company accounts, Corporation Tax and Companies House obligations | Usually reported through Self Assessment |
Can an SPV company claim mortgage interest?
One reason property investors consider limited companies is the treatment of finance costs. Subject to the relevant corporation tax rules, interest incurred wholly and exclusively for the company's property business can generally be taken into account when calculating the company's taxable result.
This differs from the rules applying to individual landlords of residential property, where relief for finance costs is restricted. This difference can be particularly relevant where a property portfolio is highly geared, but tax should never be considered in isolation from mortgage rates, fees and the cost of extracting profits from the company.
What SIC code should an SPV company use?
When registering a company and filing confirmation statements, the company must provide an appropriate Standard Industrial Classification (SIC) code describing its activities.
Common property-related codes include:
| SIC Code | Description | Typical relevance |
|---|---|---|
| 68100 | Buying and selling of own real estate | Property buying and selling activity |
| 68209 | Other letting and operating of own or leased real estate | Commonly relevant to property letting companies |
| 68320 | Management of real estate on a fee or contract basis | Property management activity where appropriate |
Your SIC code should reflect what the company actually does. Mortgage lenders can also have their own requirements concerning acceptable company activities and SIC codes, so check the proposed structure before applying for finance.
What is an SPV mortgage?
An SPV mortgage is generally a limited-company buy-to-let mortgage where the borrower is the property company rather than the individual shareholder or director.
Lenders have their own underwriting criteria. They may consider the company's activities and SIC codes, the directors and shareholders, expected rental income, loan-to-value, credit history and the experience of the people behind the company.
Directors may also be asked to provide personal guarantees. This means incorporating a company does not necessarily remove all personal financial exposure connected with the borrowing.
Advantages and disadvantages of an SPV company
Potential advantages
- Separates property activity from your personal affairs or other businesses.
- Company finance costs can receive different tax treatment from personally owned residential property.
- Profits can potentially be retained within the company for reinvestment.
- Can provide a clear structure for joint property investment.
- Shares can make ownership percentages between investors easy to identify.
- Limited-company buy-to-let mortgages are widely available from specialist lenders.
Potential disadvantages
- Annual accounts and Corporation Tax compliance are normally required.
- Companies House filing obligations apply.
- Professional and administrative costs may be higher.
- Limited-company mortgage pricing and fees can differ from personal borrowing.
- Taking profits out personally can create an additional tax charge.
- Moving an existing personally owned property into a company can trigger significant tax and transaction costs.
How do you set up an SPV company?
Setting up a property SPV is similar to incorporating another private limited company, but it is important to consider the ownership and financing structure before incorporation.
Decide who will own the company
Decide who the shareholders will be and how the shares will be divided. This can have important tax, control and succession consequences.
Choose the directors
Directors are legally responsible for running the company and complying with their statutory duties.
Choose the share structure
A straightforward structure may be appropriate for a single investor, while joint or family investment may require more consideration.
Select appropriate SIC codes
Choose codes that accurately describe the intended property activities and consider any lender requirements.
Incorporate the company
Register the company with Companies House and complete the required incorporation information.
Set up the company's finances
Open an appropriate company bank account, establish bookkeeping records and ensure funds introduced by shareholders or directors are recorded correctly.
Can I transfer an existing property into an SPV company?
It may be possible to transfer a property you already own personally to an SPV, but this is very different from simply changing the name on the title deeds.
In broad terms, the company is acquiring the property from you. Depending on the circumstances, this can create issues including Capital Gains Tax, Stamp Duty Land Tax, refinancing costs, legal fees and mortgage early-repayment charges.
Do I need a separate SPV for every property?
Not necessarily. A single SPV can potentially own several properties. Many landlords therefore build an entire portfolio within one property company rather than incorporating a new company for each purchase.
Separate SPVs may nevertheless be useful where investors want to ring-fence different projects, use different ownership structures, involve different investors or satisfy particular financing requirements. Multiple companies also mean additional accounts, tax returns and Companies House obligations, so the benefits should be weighed against the additional administration.
Is an SPV company worth it for buy-to-let?
There is no universal answer. An SPV can be attractive to some landlords, particularly where profits will be retained and reinvested, but it can be less attractive where most rental profits need to be withdrawn for personal spending.
A useful comparison should consider:
Your tax position
Compare the overall tax consequences of personal ownership with company ownership rather than looking only at Corporation Tax.
Reinvestment plans
Retaining profits to fund future deposits can produce a different result from withdrawing all profits personally each year.
Mortgage costs
Compare the actual interest rates, arrangement fees and lending criteria available personally and through a company.
Long-term plans
Consider portfolio growth, property sales, retirement, succession planning and whether other investors may become involved.
Who might consider a property SPV?
An SPV may be worth investigating if you are buying new investment property, building a buy-to-let portfolio, investing jointly with other people or intending to retain rental profits for future investment.
Conversely, buying through a company is not automatically the best option simply because you pay higher-rate Income Tax. The correct structure depends on the numbers and your longer-term objectives.
What accounts does an SPV company need to file?
Because a property SPV is normally a limited company, it has ongoing accounting and filing responsibilities. These can include preparing annual statutory accounts, filing accounts with Companies House, submitting a Company Tax Return to HMRC, paying Corporation Tax when due and filing a confirmation statement.
Directors should also maintain appropriate bookkeeping records for rental income, mortgage interest, repairs, professional costs, acquisitions, disposals and money introduced to or withdrawn from the company.
If you already have an SPV and need annual accounts prepared, see our limited company accounts filing service or view our fixed accountancy fees.
Frequently asked questions about SPV companies
What does SPV company mean?
SPV stands for Special Purpose Vehicle. It describes a company or other entity established for a particular purpose. In UK property investment, it commonly refers to a limited company created specifically to own and let property.
Is an SPV the same as a limited company?
A property SPV is normally incorporated as a private limited company. “SPV” describes the company's specific purpose rather than a separate legal category of company.
What is an SPV property company?
It is normally a limited company whose defined activity is purchasing, owning and letting property. The company owns the property and receives the rental income rather than the shareholder owning the property personally.
Can an SPV own more than one property?
Yes. A property SPV does not necessarily have to own only one property. One company can potentially hold a portfolio, subject to its structure, financing arrangements and commercial objectives.
Can I live in a property owned by my SPV?
A property acquired as a commercial investment should not simply be treated as the shareholder's personal property. Personal occupation can create tax, benefit, mortgage and other issues. Obtain advice before occupying a company-owned property personally.
Can I transfer my existing buy-to-let into an SPV?
Potentially, but transferring an existing property to your company can have significant tax and financing consequences. Capital Gains Tax, Stamp Duty Land Tax, refinancing and legal costs should be considered before proceeding.
Does an SPV pay Corporation Tax?
A UK limited-company SPV will generally be within the Corporation Tax regime and will normally pay Corporation Tax on its taxable profits and gains, subject to the applicable rules and rates.
Can I take dividends from an SPV company?
A company may pay dividends to shareholders where the legal requirements are met and sufficient distributable profits are available. The shareholder may then have personal tax to pay on those dividends.
Does an SPV need an accountant?
There is no general requirement for every small property company to appoint an accountant, but the company still has accounting, Companies House and tax obligations. An accountant can also help compare ownership structures and ensure property transactions are recorded correctly.
Should I set up an SPV before buying a property?
If you intend the company to purchase the property, it is usually sensible to decide the ownership structure before exchange and before arranging finance. Buying personally first and transferring the property later can have tax, legal and financing consequences.
Need an accountant for your SPV company?
The Online Accountants are ACCA qualified accountants providing fixed-price accounts and tax services to property investment companies and other owner-managed limited companies throughout the UK.
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