Can I change to SPV from a trading limited co. that I no longer need?

Can I change to SPV from a trading limited co. that I no longer need?

18:30 PM, 21st December 2023, About 6 months ago 7

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I’ve got a limited company that has accumulated surplus profits over many years and zero liabilities.

I am now out of that business so don’t need the company as a trading vehicle and want to switch it to an SPV to use the accumulated funds to purchase buy to lets.

The accountant says it could technically be done but I wondered if anyone had any thoughts on any wider ramifications for me to research? e.g. obstacles in raising finance with a company that wasn’t “born” an SPV etc?

Initially, I’ll buy in cash but later I intend to remortgage those properties.

Many thanks
Enam


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Comments

Graham Bowcock

9:54 AM, 22nd December 2023, About 6 months ago

As the owner of several companies (some for trading, some for property, some for holding shares in other companies) set up over 25 years, I can see no issue. As far as I know, the term SPV has no real meaning. It's just a company.

You can change the code at Companies House to one which reflects the new intention.

There are diferent tax treatments for investment v trading, but that's a matter of fact based on what the company is actually doing, not what it was set up to do.

Obviously an accountant may have a different view!!

John Tidswell

10:02 AM, 22nd December 2023, About 6 months ago

Yes, you can provided your company is no longer trading. You will need to change the standard industrial classification (SIC) code to reflect the fact it is now used solely for letting (68209) Once you have done this all lenders will be available to you. There are a couple of lenders that will allow you to borrow without doing this but you would be unnecessarily restricting your lending options.

Puzzler

10:16 AM, 23rd December 2023, About 6 months ago

I tried this and the bank where I held the account would not agree. An SPV is non-trading and must never have traded (cf. dormant).

Maybe you can set up a new bank account with another bank but let me know if you succeed

Welly

19:57 PM, 23rd December 2023, About 6 months ago

Reply to the comment left by Puzzler at 23/12/2023 - 10:16So the bank that you previously held your trading account with raised this objection? Can I ask what alerted them to the change of status to SPV?
I'll certainly let you know how I get on although I was just planning on using my trading account that I've had with Barclays for 20 years.

Tony

12:33 PM, 24th December 2023, About 6 months ago

Reply to the comment left by Welly at 23/12/2023 - 19:57
If you looking to refinance with a buy to let mortgage, you would be better just to setup a new company (with the same directorship/sharehold, not a must depending on the where the funds come from to purchase the property, money laundering act) all taxes must be paid accordingly.
This is because you will have more options of lenders(more options to better rates and cheaper deals).
Some buy to let mortgage lenders don't accept companies that previously traded.
All lenders work on the credit of the directorship/shareholders or guarantor. Regardless of new or old company.
If you change the trading company to SPV, some lenders won't consider you at all, all will look into the accounts 1-3 years of the Trading company and directorship/shareholders.
New company they will look into directorship/shareholders or guarantor (only necessary if directorship/shareholders income, saving etc, isn't sufficient for the mortgage lender)
Buy to let under SPV will always need company ownerships taxable income to be able to afford repayments regardless of rental income on property in case tenants don't pay.
Hope this was helpful, merry Xmas and Happy newsyear

Puzzler

14:29 PM, 24th December 2023, About 6 months ago

Reply to the comment left by Welly at 23/12/2023 - 19:57Gosh it was eight years ago! Any lender will look at the company details on Companies House so I don't see how you'll keep it from them. They will not want it to be used for trading and they may see it as a red flag. I happened to query it with my bank as I had a dormant limited company account I wanted to use which had never traded. Companies House, HMRC and lenders will not like it. HMRC will not want the tax issues to be muddled. You would need to change the SIC codes to the ones below and only those. I set up a new company on their advice and my broker's. It takes 5 minutes. I think you will find you will have to once you start looking for lenders but if you haven't traded for a long time it might be OK. You should be able to change the name on the bank account. I couldn't because that company didn't have one, I was operating as a sole trader.

68100 - Buying and selling of own real estate
68209 - Other letting and operating of own or leased real estate
68320 - Management of real estate on a fee or contract basis

I needed all three codes

Graham Bowcock

15:21 PM, 26th December 2023, About 6 months ago

A further comment from me.

As I said before, we run a number of companies, with a mix of trading and investment. I don't recall any lender ever querying how the companies operate; in my experience they are interested in the deal we're doing at the time. As they always have PGs their risk is based on the directors' ability to repay loans and we have secured some pretty favourable rates over the years.

I've never been worried about how lenders may view the company, other than in terms of profitability/cash, etc.

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