Over the years, special purpose vehicles have become popular with property investors, especially for setting up companies. In addition to property investments, there are other reasons why you should consider setting up an SPV as part of your business plan.
A special Purpose vehicle company is a ‘subsidiary’ created by the parent company to isolate financial risk.
Essentially it is a separate company with its own balance sheet. An SPV is formed to undertake a specific business purpose or activity – such as
Isolate parent company assets
Common uses of an SPV include but are not limited to :
Sharing business risk – legally isolating the risks of certain projects without affecting others. Selling property – having the properties in an SPV would avoid the Capital gains tax. Transferring Assets – it is easier to transfer assets and requires less work you would only need to sell the SPV through a merger or acquisition process
Why an SPV ?
It comes down to tax efficiency.
A landlord who purchases rental properties through an SPV limited company finds they benefit on the tax-efficiency front. This is largely due to the tax relief on finance costs that has recently been introduced for individual landlords.
A growing percentage of limited companies (including SPVs in the UK) now have access to mortgages. Setting up an SPV is very similar to the process of setting up any other kind of company in the UK, involving Companies House.
For more information on Special Purpose Vehicle companies and how we can help click here.
If you have any queries on this or are unsure if this would be right for you contact us to schedule a free consultation, where we can let you know how we can help.