When looking at starting your property journey or looking to increase your portfolio, one of the considerations most investors will have is whether to purchase in your personal name or set up a limited company. Although as mortgage advisers, we are unable to provide this answer as it is something that we would highly recommend speaking to a qualified tax adviser/accountant about due to tax implications.
We’ve asked Paul Hinchley-Bradshaw, Senior Property Finance Specialist, to outline what lenders will be looking at when submitting your limited company applications.
Take it away Paul…
As said above, we can’t give you the answer on how you should purchase a property- either through a personal name or a limited company, but what we can do is shed light on what will be considered when it comes to your application as a limited company!
Below I’ve outlined what an SPV is, what SIC codes you should use for your SPV and if you can use your current limited company to purchase properties. To find out more, keep on reading!
What is an SPV?
A term that is widely used when discussing limited company lending is SPV, but what does this mean? An SPV stands for Special Purpose Vehicle, and is a legal entity created for one specific purpose. This means that the company or SPV as it’s known, has been set up only for the purpose of holding properties and for carrying out buy to let activities. An SPV can hold multiple properties and is a standalone legal entity, having its own assets and liabilities.
What SIC Code should I use for my SPV?
SIC codes stands for ‘Standard Industrial Classification’ which provides your limited company with the purpose or type of business/activity is involved in, in order for your limited to be considered as an SPV for holding property, lenders will expect to see a minimum of one of the following SIC codes attached to your company:
68100 – Buying and selling of own real estate
68209 – Other letting operating of own or leased real estate
68320 – Management of real estate on a fee or contact basis
68201 – Renting and operating of Housing Association real estate
Although these are the four accepted by all lenders, others will also accept 55100 – Provision of accommodation for short term stay an 55209 – Other holiday and other collective accommodation, please speak to your adviser first as these could restrict the type of properties your SPV can hold and the number of lenders available to you.
Can I use my current limited company to purchase properties?
Any company that is currently being used for any other purpose than purely holding properties will be known as a trading company and although can be considered for use of purchasing an investment property, this will once again can provide an extremely restricted lender availability.
First things first
Whenever considering purchasing properties it so important to get everything set up right initially as although changes can be made to your SPV this could delay your application, cost you further fees with your tax adviser/accountant or could even result in a new application having to be submitted incurring potentially further upfront fees.
