We can help you decide if a Special Purpose Vehicle is right for you 

We can help you decide if a Special Purpose Vehicle is right for you 

What is a Special Purpose Vehicle? 

A Special Purpose Vehicle is a broad term with many meanings but is often used to describe a situation where a limited company is set up for one specific purpose a ‘special purpose’. It is common in property investing where an investor may set up a limited company to hold a property and nothing else. 

Is a Special Purpose Vehicle (SPV) tax efficient? 

Property investments held in limited companies may still be able to claim mortgage interest tax relief and therefore this can make them a more tax efficient way of managing a property investment rather than owning it directly. 
However whilst there may be tax efficiencies you need to consider the whole picture. There may well be more costs involved in running an SPV that will outweigh the benefits. For example lenders may charge higher borrowing costs to limited companies, associated lending and legal fees may also be higher. 
Additionally you will have to compliance requirements of running and limited company and this includes the preparation of annual accounts. 
There will be other tax factors that are different when operating an SPV and professional advice is recommended so that the implications of corporation tax and Capital Gains Tax are understood. 

Advantages of using a Special Purpose Vehicle 

Financing a property 

One of the main reasons for establishing a Special Purpose Vehicle is in order to arrange funding. Buy to let lenders that lend to companies mainly prefer to deal with SPV’s. This is because the entity is much quicker and easier to understand and lenders often perceive them to be lower risk. 
An SPV can provide an easier sale as it is the only business in a company and so it does not need disentangling prior to a sale or alternatively the whole company can just be sold. 


When you come to dispose of an asset in an SPV you have flexibility because the business is separate from your other business activities and so easy to separate or a sale. In addition to selling the asset, when working with an SPV you also have the option of selling the SPV company with the asset in it. This may be attractive to people buying the asset who want the benefits of operating an SPV. 

Reducing overall business risk 

If you put a property in an SPV you are separating it from any other business activities that you have and this reduces your overall risk. For example if you have a trading company and it fails then this would not affect any properties that you hold in an SPV. 

Other Investors 

An SPV means that you can work on a property investment with other investors but at the same time keep the investors away from your other business interests 

Transferring a property into an SPV 

If you want to transfer a property into an SPV so that you can claim mortgage interest tax relief then you are normally able to do this by selling your property to your SPV. However there are costs involved in doing this and you should evaluate all of the costs such as conveyancing, stamp duty etc. before deciding this is a worthwhile course of action. 

How do you form an SPV? 

A Special Purpose Vehicle is not a recognised company so you cannot register a business as an SPV. To create an SPV, you form a limited company, like you would any other company.  
However, when forming the company you should do it in a way that makes clear that it is an SPV. We can provide you with guidance when it comes to Setting up a Limited Company
The Memorandum of Association and the Articles of Association, should clearly set out what the business of the company is and also and make clear that the company is an SPV for the purposes of a property business. This step is important for seeking and getting approved for mortgages. 
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