What Is A Special Purpose Vehicle (SPV)?

With the introduction of Section 24, property investors are exploring ways to limit their tax liability. One way to do this is to form a limited company for buy to let. This solution won't make financial sense for everybody but, if it is the route you decide to go down, then you will need your new company to be a special purpose vehicle or SPV.

Property Expert Series: Richard Ignatowicz From Mortgage Savers

• Part 1: Introducing Richard Ignatowicz From Mortgage Savers
• Part 2: An Introduction To Specialist Mortgages for Property Investors
• Part 3: What Is Section 24 And What Does It Mean For Buy-To-Let?
• Part 4: Do Landlords Need To Set Up A Buy To Let Limited Company?
• Part 5: What Is A Special Purpose Vehicle (SPV)?
• Part 6: How Should Landlords Go About Finding The Best Buy To Let Mortgage?
• Part 7: What Kind Of Property Deals Should Investors Be Looking At?
• Part 8: What Does The Mortgage Market Look Like In 2017?

What Is A Special Purpose Vehicle?

Amy: Richard, can you tell me, what is a special purpose vehicle? In property investment circles we hear this term a lot.

Richard: An SPV (or special purpose vehicle) is a type of limited company that mortgage lenders will accept. It's a setup, under which you can apply for mortgages as a limited company.

So, you have to go to Company's House - there are specific, what are called sic codes, that lenders will accept - and you have to register a company under that specific sic code. Then you can trade under a limited company and still apply for mortgages, and so on.

Amy: Perfect, and this could be, as you touched upon, one way of getting round cash flow issues caused by the new tax regime. And, we're not saying it will be, but it could be a way of protecting yourself.

Richard: For limiting your tax liability for sure.