Transferring BTL deposits from my trading company to SPV?

by Readers Question

15:20 PM, 23rd May 2016
About 3 years ago

Transferring BTL deposits from my trading company to SPV?

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Transferring BTL deposits from my trading company to SPV?

I’ve been contracting through a one-person limited company for 5 years now and have accrued profits that I’d like to invest in Buy to Let properties. I’ve read about setting up an Special Purpose Vehicle (SPV) to invest through, but what I can’t find any details on are the options for transferring the deposit between my trading company and SPV.companies house

There seems to be 2 options. I could make my SPV a shareholder of the trading company and transfer the deposit as a dividend. Not sure whether there are other implications of linking 2 companies in this way. The other option seems to be a commercial loan to the SPV – but then I need to charge commercial rates of interest? It also means the companies are linked until the SPV can pay that loan off – which could take a long time.

Does anyone have any experience in this area?

Tanya

 



Comments

Mark Alexander

16:04 PM, 23rd May 2016
About 3 years ago

Hi Tanya

Please take professional advice on this. See the contact form on our Tax page.

Ive heard that a common mistake is making your SPV a subsidiary of your trading company. If something goes wrong in your trading company your investments are then vulnerable to attack from creditors. Far better to make the SPV either a sister company under a group holding company or just a parent company I've been told. I understand the latter is the better structure as the profits in the trading company can be transferred up to the holding company without further tax implications.
.

Simon Misiewicz

22:03 PM, 24th May 2016
About 3 years ago

The pros of making it a subsidiary is that dividends payment between companies is free from tax.

The cons as Mark quite rightly says is the risk of one failing. Given that you are an IT contractor and have suitable insurance in place then you should not need to worry about that.

You can also create a loan between companies but I would suggest that you use a commercial rate of 3.5% to keep HMRC happy.

Warm regards

Simon

Mathi Prakash

17:38 PM, 25th July 2017
About A year ago

Hi

I have found this forum useful while browsing internet. I have the same situation like Tanya (original poster). I would like to know if SPV is just 30% shareholder (remaining 35% me and 35% my spouse) of my trading company, will it be classified as subsidiary?

Also, I am not clear on why my SPV will be affected by creditors if my trading company goes wrong. I thought the SPV will be just a shareholder. Correct me if I am wrong. Thanks in advance if someone can enlighten me.

simon garforth

16:05 PM, 15th August 2017
About A year ago

I am interested in the subject. I would really like to know how its all structured as I would like to start a portfolio using an SPV. I am a contractor to and want to be more tax efficient.

I want to build the portfolio to fund my retirement. It is also something I would want to leave to my children when I pass so would like to know how i could structure that in.

At the moment I am in the 40% bracket so using this method would put me back below that threshold but i am confused with the structure, taxation and movement of funds. I would seek professional advice but don't really know who to contact.

Is there something that explains the mechanics of it all?

Mark Alexander

17:05 PM, 15th August 2017
About A year ago

Reply to the comment left by simon garforth at 15/08/2017 - 16:05Hi Simon

I can provide you with the guidance you need, please see our tax section.

Given that you are in the same industry as East Online Accounting Ltd (you may well have heard of them) I thought you might be interested to read the testimonial that Jaques Steenkemp, their managing director, posted on Property118 following the telephone consultation he had with me - see below.

"We at Easy Online Accounting Ltd, specialise in looking after contractors and SME’s, and we pride ourselves with the excellent personal service we give our clients, as well as providing easy online solutions to our clients for managing their accounts. We are always on the lookout for ways to help our clients, and that is why we contacted Mark, to gain a better understanding of the options available to our clients, as well as some other property related questions we had. And are we glad we did! How refreshing it was talking to someone who could answer our questions! Mark could relate to everything we were asking. His knowledge and experience is off the scale. He not only answered our questions, he pre-empted other questions we had, and provided additional information he knew would be useful to us. We are very grateful for the hour he spared us, and will definitely be contacting Mark again in future."

His testimonial is posted in the comments on the page linked below. There are many others you may also wish to read.

https://www.property118.com/consultancy-mark-alexander/comment-page-6/#comments

Puzzler

14:53 PM, 18th August 2017
About A year ago

You would need to check with the lender, I don't think they permit an SPV to have any other activity or liabilities (which it would if it was a shareholder) as it would risk their security. Hence why it is called a Special Purpose Vehicle - it has only this one application.

Mark Alexander

15:15 PM, 18th August 2017
About A year ago

Reply to the comment left by Puzzler at 18/08/2017 - 14:53
Hi Puzzler

You are correct.

What's required is a sister company relationship within a holding company structure. Inter-company transfers are tax neutral and exempt from SDLT.

I have assisted several IT contractors to set up such structures for optimal tax and lending efficiency whilst ring-fencing risks too.

Tom Gregory

21:41 PM, 17th January 2018
About 11 months ago

Reply to the comment left by Mark Alexander at 18/08/2017 - 15:15
Hi Mark,

I am needing to set up a similar structure myself and would like to find out further information about what you have proposed. Do you know who I would be able to contact for this please?

Mark Alexander

7:05 AM, 18th January 2018
About 11 months ago

Reply to the comment left by Tom Gregory at 17/01/2018 - 21:41
Hi Tom

Please book a tax consultation with me via the link below

https://www.property118.com/book-a-consultation/


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