SPVs (Special Purpose Vehicles)
We have seen an increase in requests for the registration of special purpose vehicles for property investment purposes since the changes from the 2017 budget have come into force.
The changes included a reduction in the amount of tax relief available for interest on buy-to-let mortgages.
There are two ways of owning buy-to-let property: using your personal name, or through a limited company.
One of the primary reasons for the growth in limited companies being registered for buy-to-let is the tax treatment. Instead of paying income tax as an individual, a limited company pays corporation tax, which is will be 18% in April 2018 and 17% in April 2019.
What is a Special Purpose Vehicle?
An SPV (Special Purpose Vehicle) is a type of limited company that is set up for a specific purpose. For example, purely for the purpose of owning a property. Mortgage lenders generally prefer to lend money to an SPV limited company as the objects in the articles restrict the company from other areas of business. Lenders also tend to relax the stress testing when it comes to rental calculations allowing the borrower to maximise the borrowing.
While increasingly popular, there are several things to consider and it should not be assumed that limited company buy-to-lets are suitable for everyone, speak to your lender.
What do you need to set up an SPV?
It’s best to know the requirements of your mortgage lender prior to setting up the company as they may have specific object requests.
Our team has experience drafting the special purpose articles to meet your mortgage lender requirements. We can then incorporate those into your SPV articles and register your company for you.
At Company Formations 247 we help our customers form bespoke companies at competitive prices. Give us a call on 0808 168 3676 or click here for a range of packages that fit your needs and your budget!