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  • Tax

    LTD & SPV dilemma!

    Hi all

    Looked up some old feeds relating to my question however wasn't able to establish what I was after so here I go. I am a HRT payer in my main job until I plan to go part time over the next few years. After doing considerable amount of research I have come to a conclusion that for now the LTD company is the best way forward as per my circumstances. My current BTL is in London and its value has gone up 40-50% since I got it so there is no question of transferring that to the company. I was however working on my future plans and got confused about the various elements involved in running a company and the know how. Before I engage and pay an accountant I wanted to see if I could get help with some basics;

    I would like to set up a LTD company to be able to undertake more than just BTL investments. If I come across a good JV or if I consider doing a flip I would like to do this under the LTD company structure. Now,

    1. For the lettings side of my business or to buy a straightforward BTL, I understand I got to have an SPV? Can this be linked to the LTD company, is it part of the LTD company or is it a new company altogether? This is my biggest confusion, in getting to know what the LTD company and SPV can/cannot undertake...

    2. Based on the above, would I have two company numbers and names? File corporation tax and returns twice? Two bank accounts? 

    3. If I was to use a director's loan to fund my business and wanted to transfer funds from my personal account, would I be transferring it to the SPV or the LTD company? 

    4. Do I need to open both in one go?

    Yes I am fully aware an accountant is the right person to ask these questions and I will appoint one when I go ahead with it all however at this stage I am only trying to gain some knowledge from the experts and hopefully someone can shed some light.

    TIA Smile

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    I'm in a similar situation. I don't know the answers yet and an accountant is the right route to take.

    I found this website which outlines the basics. (You'll need to change the https to http)

    https://support.companiesmadesimple.com/c...on-process

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    Thanks Gary Hodge, Ive read that  and it gives a good overview. Lets see if anyone knows more in detail as an accountant with property expertise is not very easy to find around where I live and the ones that are there near enough are charging in the region of £250 + VAT for a basic consultation!

    I definitely need an accountant and don't mind paying them their fees however thats once Ive established my business model and plans...

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    I disagree you need an Accountant  ( as unfortunately, too many of them just crunch numbers and don't advise ) - No disrespect meant to those Accountants who do actually ADVISE.

    Look for a Tax advisor, once you know what to claim for and how, submitting your Tax return is within most landlords capabilities.

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    Re the very first post in the string. you need to set up the company with the correct SIC code for property development or holding properties to let.

    The Ltd co is the SPV. you need a bank account for the ltd co. to fund it you then lend your personal money to the ltd co this becomes a directors loan which you have by the rules of HMRC to charge interest on as it is a loan to the co, not sure what the minimum rate is at the moment but i think it is 4 % and i think that you can charge as high as 9 or 10% as it is effectively an unsecured loan.

    when your ltd co buys the property it uses this money to fund the purchase.

    i gear my purchases generally LTV of 75% there are many good companies out there that will lend the money if you set your ltd co up correctly and have the correct SPV  Code and you will probably have to give personal guarantees on the loans certainly at first. I have been doing this property "thing" for two years now and i really advise a good accountant who understands tax and specifically property tax as it can be a bit daunting.

    Always plan the exit route look long term.

    I am still working and either plough the earnings back into more property, or reduce the loan to create more equity. I only let to Students who are in my experience great payers and move out at the end of the term of the tenancy. parental guarantees essential but haven't had a bad experience yet i currently have 25 letting rooms spread over 6 houses all let to students bought in a low housing cost area with an expanding university.

    SIC codes which i think are relevant you only need one i use 68201 all this info is readily available on the internet

    68100 – Buying & sell own real estate
    68201 – Renting & operating of housing association real estate
    68209 – Other letting & operating of own or leased real estate
    68320 – Management of real estate on a fee or contract basis

    good luck with your property adventure it will be a rollercoaster of a ride but i find it rewarding.

    Hope this is of use to you but don't take it as gospel its just my experience as a newbee to all this.

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    Thanks bob k, great info!

    So from what you know, can I undertake other (not lettings) property related business under the SPV?

    Or do I need to make the SPV like a subsidiary of the main LTD company? Or as long as I have the right SIC codes I can do it all under the same umbrella?

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    I was in a similar situation too.

    As Bob has very rightly said SPV is a limited company so you set it up with right codes otherwise banks keep bothering you before approving your mortgages.

    Banks do ask for trail of money when you transfer funds from personal to limited company account ,it will be a director loan so you can claim that back once business is up and running.

    But do keep in mind 19% percent corporation tax and then dividend tax on any drawings.

    My strategy is to keep building up the portfolio in limited company till you start getting a stable required income and then cut down on your work. 

    Also do consider setting up another company solely dealing with the management of your properties.

    So basically your letting company will charge your SPV for property management, it's a good way to offset some further tax implications.

    Yes you do have to manage two bank accounts and returns on two companies but will save you some money.

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    Thanks shassan! Do you pay corp tax when taking out the directors loan as well in the future. I assumed that amount would be exempt!

    Just to clarify, does the SPV just hold the properties and deal with purchase/sale, is that it? Rent and other management will have to be via another LTD company? If thats the case can the LTD company that deals with the management be involved in other activities i.e. property purchase and refurb/serviced accommodation etc...just trying to get an idea

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    Hi Kay,no corporation tax on the original sum invested into SPV through your personal account. You can buy and sell through SPV . Rental  company deals with the management of properties .The more simple you do easier it is to manage .

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    Hi it an interesting and educative topic.

    Someone have ABC LTD then he wants to setup a JV on a property management company  XYZ  with a partner & another online business. CBA?

    So would the other businesses 'SPV' be a subsidiary of ABC (ABC the parent company)? OR  all business will be independent LTD?

    SPV is a term within an independent LTD?

    Hope its making sense!

    Will appreciate if someone  kindly clarify bit further?

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    Two of your questions:

    So would the other businesses 'SPV' be a subsidiary of ABC (ABC the parent company)? OR  all business will be independent LTD?  DEPENDS. AN SPV (LIKE ANY OTHER LTD CO)  CAN BE A SUBSIDIARY OF ABC (I.E. ABC OWNS THE SHARES IN SPV, BUT SPV IS STILL A SEPARATE LTD CO), OR IT CAN BE A SISTER COMPANY (YOU AS SHAREHOLDER OF ABC ALSO OWNS SHARES OF SPV DIRECTLY).

    SPV is a term within an independent LTD?  NO, SPVs ARE JUST NORMAL LTD COMPANIES BUT AS PER MY OTHER POST THEY ONLY HAVE A SINGLE/SPECIAL PURPOSE

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