79% of BTL purchases now in Ltd company names post Section 24

by Property 118

2 months ago

79% of BTL purchases now in Ltd company names post Section 24

Make Text Bigger
79% of BTL purchases now in Ltd company names post Section 24

Mortgages for Business Quarter 3 figures show that post Section 24 mortgage interest relief restrictions for individual purchasers that 79% of Buy to Let purchases by value are now in the name of a Limited Company.

This is up from 73% of purchases in Quarter 2 of this year.

For all landlord Buy to Let transactions including remortgages and purchases 48% were now completed in the name of a limited company.

Companies House stats also show a big increase in registration of Special/Single Purpose Vehicles (SPV) with property specific sic codes. This is because many Buy to Let lenders criteria prefers SPVs over trading limited companies.

Out of the total of 36 Buy to Let lenders available in the market 15 (42%) offer limited company products and out of  1,233 products 263 (21%) were available to limited companies.

Steve Olejnik, COO at Mortgages for Business said: “There was, unsurprisingly, a spike in SPV registrations last year, but it looks like the numbers have been increasing for considerably longer than might be expected. Looking at historic registrations, numbers have been on the rise ever since 2008 which, I’m sure you can guess, was not a popular year to start a property company).

“That said, the 2015 Summer Budget has noticeably sped things up, with 2015 and 2016 showing the strongest growth in registrations in the sample, whether proportionally or in absolute terms. Over 20,000 new SPVs were registered in the year so far compared to c.13,000 in 2014 scaling up suggests a figure somewhere just shy of 35,000 by the end of the year, an increase of c35% over 2016.

“Landlords are turning to SPVs because of the benefits they bring in the form of tax efficiencies and softer affordability testing. Switching to corporate structures is not without risk, however, and we recommend all our clients take professional tax and finance advice before deciding how to proceed.”

Comments

Rob Crawford

2 months ago

I hope these landlords have taken advice. I understand that if a Ltd property company is considered an investment business it maybe considered by HMRC as a means of evading tax. If the management of the properties does not absorb a significant amount of the landlords time, i.e. an agent manages the property for the landlord, then the landlord could still be subject to Section 24.

Neil Patterson

2 months ago

Not if purchased in a Ltd co.

karin melbye

2 months ago

Has anyone come across the hybrid arrangements recommended by LessTax4Landlords?

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Universal Credit and private landlords