Buy to let lenders who offer mortgages to limited companies usually require the limited company to be an SPV (Special Purpose Vehicle).
In the mortgage world, a Special Purpose Vehicle limited company is a company which is set up just to hold property and do nothing else. Buy to let lenders offering mortgages to corporate vehicles mostly prefer SPVs to trading limited companies because they are easier and quicker to understand and underwrite, and are perceived as being lower risk.
Many more landlords are now purchasing rental property via an SPV limited company because it can be more tax efficient now that the changes to tax relief on finance costs for individual landlords have been phased in.
As you can imagine, we now frequently get asked how one goes about setting up an SPV. The honest answer is that it is very simple and is no different to setting up any other company.
You can either ask your accountant or simply go to the Companies House website and set the company up yourself. An SPV limited company costs £12 to set up, and if done online, it will take just a few minutes to arrange. As long as you intend to use the company just for property letting going forward, this would be an SPV – there is nothing more complicated to it!
For those who already have companies and are wondering whether this would meet the SPV criteria, here is what the lenders like to see:
• SIC code for letting property
• No sign of any revenue through the company of anything other than letting property
If the company has traded in another field in the past, some of the lenders will still lend to the company as long as this is historic, the company has the right SIC code and the accountant can confirm the company will only be letting property going forwards.
What is a SIC code?
The Standard Industrial Classification of Economic Activities (SIC) is used to classify business establishments by the type of economic activity in which they are engaged.
How do you get a SIC code?
You will need a SIC code when filing the SPV’s Annual Return with Companies House. To choose a SIC code, use the official Condensed SIC list on the Gov.uk website. Most investors require a SIC code from Section L: Real estate activities.
Buy to let mortgages for non-SPV limited companies
If your company trades in something other than property you can still get a buy to let mortgage; however, your options are restricted to fewer specialist lenders.