In this guide, we’ll explore how to structure your property business efficiently using Special Purpose Vehicles (SPVs) and trading companies—and when to use each.
What Is a Special Purpose Vehicle (SPV)?
An SPV is a limited company set up specifically for holding property investments. It’s the preferred route for many landlords due to several tax advantages:
- Full mortgage interest relief: Unlike individuals, SPVs can offset 100% of mortgage interest as an allowable expense.
- Lower corporation tax: Profits are taxed at the corporation tax rate, which is often lower than higher-rate personal tax.
- Asset protection: SPVs provide limited liability, helping to shield your personal finances from legal claims or debt.
To learn more about setting up an SPV, read this overview from Commercial Trust.
When to Use a Trading Company
If you’re buying, refurbishing, and selling properties (commonly known as flipping), an SPV isn’t ideal. Instead, a trading company should be used for tax efficiency.
Trading companies are designed for active income from development and property sales. According to Provestor, profits from these activities are considered trading income and taxed accordingly under corporation tax rules.
In addition:
- VAT registration may be required depending on your turnover.
- Choosing the correct SIC code is essential for compliance and funding access.
Need help selecting a SIC code? Check our SIC Code Guide.
SPVs vs Trading Companies: Which One Is Right?
Here’s a quick comparison to help you decide:
| Feature | SPV | Trading Company |
|---|---|---|
| Purpose | Hold rental properties | Flip or develop property |
| Tax Treatment | Property investment tax rules | Trading income tax rules |
| Lender Preference | Often preferred by BTL lenders | Varies by lender and project |
Can You Use Both Structures?
Yes! Many experienced investors operate multiple companies: one SPV for long-term lets and another trading company for development. This separation improves tax efficiency and financial clarity. It also helps with lender relationships, risk management, and business planning.
Watch this video for more on structuring property flips for tax efficiency.
Start Structuring Your Property Business the Right Way
Whether you’re new to investing or scaling up your portfolio, getting your structure right from the start makes all the difference. Our team at Nest Hub Properties can help you make smart decisions tailored to your goals and financial situation.
We help clients set up SPVs, source deals, manage refurbishments, and stay compliant with UK property investment tax rules.
📧 simon@nesthub.properties
📞 Call us today for a consultation.
