As a result, lenders like Together are offering products tailored to limited-company landlords, including tailored products for those who’ve set up Special Purpose Vehicles (SPVs) as a way of running their portfolios.
Here are a few pointers about why landlords and property investors might want to consider the SPV route when setting up a limited company…
What is an SPV?
It’s a company set up solely for the purposes of holding property, and nothing else.
So if a part-time landlord is thinking of setting up a limited company for tax purposes, and their business makes all of its income from property, it’s an option that could work for them.
Why should they consider setting up an SPV?
When it comes to getting a buy-to-let mortgage, it can be easier for the provider to underwrite the application from an SPV than from a normal trading company. As a result, more mortgage products are available to SPVs than other limited companies.
This is because all of the SPV’s income and liabilities are tied to the property, making it simpler to assess whether the SPV can cover the mortgage repayments and management fees.
Landlords can still get a buy-to-let mortgage if they register as a trading company rather than an SPV; they’ll just have less choice about the mortgage providers (and mortgage products) that they can access. Trading companies’ multiple income streams and multiple liabilities make them a bigger risk for mortgage providers.
How do they set up an SPV?
An accountant to do it, or it can be done online, and costs less than £20. The landlord will need a company name - something that nobody else has - a company address, which can be a home or office address, and at least one director who is at least 16. They’ll also need details of the shareholders and a five-digit ‘SIC’ code used to classify their business. A memorandum and articles of association are needed to record the shareholders’ agreement to form the company, and its written rules. Finally, they’ll need to provide details of anyone with significant control, including anyone with 25% of more of the shares.
Setting up a trading company instead?
An SPV is a non-trading company, existing exclusively for buying, selling and letting property. Customers who want to trade in any other kind of product or service – for example, offering property maintenance, where they employ tradespeople as full-time staff and advertise their services to the general public – they can roll all of their business together into a trading company. A third option is to simply have two businesses: an SPV for property dealings, and a trading company for any other business the customer has.
