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In recent months, there has been a number of articles in the press concerning limited liability companies, in particular Special Purpose Vehicles, being used to remove property investments from personal ownership and move them to corporate ownership.

This blog post is particularly aimed at the acquisition of new properties, as the transfer of existing property from personal to corporate ownership will have costs in terms of stamp duty land tax and capital gains tax. These charges will not apply if the property portfolio is held in a formal partnership, which is recognised as such by HMRC. There are some conditions to be met but there might be scope for planning around this, which we would be able to advise on.

Why use a corporate structure for a buy-to-let portfolio?

A limited liability company can be set up just to hold property assets, where the profits from lettings can be withdrawn when needed as a salary or as dividends. This company can now be used to facilitate the purchase of buy-to-let properties. Previously, it has been difficult to raise finance as a corporate structure but now there are several lenders who specialise in limited liability company buy-to-let mortgages.

This strategy may not be suitable for everyone and this complex decision does depend on your long-term financial goals, so please do seek professional advice early.

Possible benefits of corporate ownership

  • If you are an additional or higher rate tax payer, by using an Special Purpose Vehicle, your rental income is not immediately subject to your highest marginal rate of tax. The rental income after expenses would be subject to corporation tax within the company and then can be withdrawn efficiently as needed.
  • Setting up a Special Purpose Vehicle company does not have to be complicated or expensive
  • Building a buy-to-let portfolio via a Special Purpose Vehicle can be a useful way to build and boost your retirement income, whilst giving you the flexibility to manage your highest marginal rate of tax in retirement.
  • The Special Purpose Vehicle can have multiple shareholders, meaning that it can be useful for estate and inheritance tax planning, specifically, for passing on assets to children and grandchildren.
  • Allows leverage, as the Special Purpose Vehicle can be leveraged to fund further expansion of the portfolio.
  • The limited company status means that your liability runs only to any investment that you make in the company.
  • There are fewer age restrictions imposed by lenders when lending to a limited company, than to an individual.

When is it not suitable to use an SPV?

  • A Special Purpose Vehicle is helpful, in the most, for managing income over the longer term. A Special Purpose Vehicle is unlikely to be suitable if your goal is to buy and sell property for profit.
  • If you are only planning to own just one buy-to-let property, using a Special Purpose Vehicle may not be suitable.
  • There are costs associated with annual compliance on the completion of accounts and also filing obligations at Companies House and with HMRC.

If you would like to discuss any elements of this post with the team, please get in touch.