The term Special Purpose Vehicle is used for a subsidiary company / legal entity created for a specific purpose or activity. SPV's are formed by the parent company in order to isolate financial risks. So if either the parent company or the SPV entity gets into financial difficulty, one will not affect the other as both are separate legal entities / companies.
SPV Limited Companies allow existing entities or directors to undertake potentially financially risky & diverse projects while mitigating the risks associated if the project results in failure as each is a standalone legal entity with respect to accountancy, tax and insolvency and free from any pre-existing commitments or debts.
Put simply, a Special purpose vehicle (SPV) is a regular Limited Company which is used for a specific purpose.
For example, in terms of property investment, SPV's are used to purchase and rent out Buy-to-Let properties.
We can form your SPV's Limited Company or Limited Partnership quickly and efficiently. We also offer Nominee Director and Nominee Shareholder Services, see below for details of what's included in our SPV Limited Company formation.
Limited Company Formation
We can form your SPV's Limited Company or Limited Partnership quickly and efficiently, providing you with the corporate structure you need to complete the formation of your Special Purpose Vehicle. Our company formation service includes:
- UK Private Limited Company
- Fast Formation (2-hours)
- 100% Managed Formation (We do everything for you)
- All Fees (There are no hidden charges)
- London Registered Office Address
- Director/PSC Service Address
- Director Service Address
- Digital mail forwarding from Companies House & HMRC
- Digital Certificate of Incorporation
- Digital Memorandum & Articles of Association
- Digital Share Certificate
* Please note that we are registered for vat. Our prices are subject to 20% vat (unless you are based outside UK).
** One off package price does not include ongoing service or maintenance, these services are available separately.
If you are looking for company formation with nominee director, our nominee director services are also available within our
How can an SPV be used?
Common functions of an SPV include, but are not limited to the following:
- SPV's can be formed as a limited company or a limited liability partnership
- The SPV's financials will not appear on the parent company's balance sheet. Instead, it will have its own balance sheet, it is a standalone/isolated legal entity.
- It is possible to form several different SPVs for different projects to keep projects independent & isolated.
- If you place a property within an SPV, your property can be sold or transferred if you choose to sell or transfer ownership of the SPV.
- SPVs can be used to conceal company debt. If you are looking at investing in a company, ensure you study any associated SPVs to ensure you get the full picture of the companies finances.
- SPV's can be used in order to make transfer of assets simpler and to mitigate taxes when selling property
- SPV's are quick to underwrite and easy to understand.
- You only need to pay corporation tax at 19% on the rental profits and gains from selling property in the case of limited company buy-to-let.
- SPV's can help reduce income tax liability.
- SPV's can be benefit from Members Voluntary liquidation (MVL) assisting shutdown of an existing company.
- Personal loan investments in an SPV allows you to draw back the amount by way of a director's loan (tax-free).
- SPV's are able to claim full relief on mortgage interest as its an allowable expense, tax relief can also be claimed on repairs & service charges.
- Buy-to-let mortgage lenders offering to corporate entities prefer SPVs as they are easy to underwrite and simple to understand.
- SPV's can help mitigate and control personal tax paid on property income, there is also no income tax due on retained profits, which could give you more to reinvest in additional properties.
Please note: We only provide the company formation component of the SPV. How you use it, manage it and operate it is up to you.
Our Nominee Services are subject to limitations. Please discuss your intended usage with us so we can ensure suitability.
Special Purpose Vehicles Frequently Asked Questions
A:SPV's are created by a parent company to isolate specific assets, investments, debt or financing in a separate company, the SPV. Most often these separate companies keep their own balance sheet and are not referenced on the parent companies as they are frequently used to undertake high-risk projects, isolating the parent company from any associated risks.
The separate company structure ensures all its operations are insular from the parent companies.
Special Purpose Vehicles are companies/legal entities created for a specific purpose and can help businesses when they need to:
- Secure and isolate assets (asset securitization), operations or investment / financing of a project
- Create joint ventures or partnerships for specific projects
- Perform certain financial transactions
- Mitigate risks to parent company
SPV's are popular with entrepreneurs & commonly used when structuring and setting up a company in the UK, especially by property investors when purchasing properties & real estate or for buy-to-let purposes.
A:The SPV is usually formed as a limited company (LTD, limited liability partnership (LLP) or trust and its structure vary depending on its intended purpose. SPV’s are commonly used by groups of investors to collate assets to collectively invest in a new business with a specific objective, such as purchasing land for a development project.
A:SPV’s often operate as an affiliate of the parent company. The parent company sells specific assets to the SPV and the SPV attracts independent investment itself based on the assets it holds, acting as an indirect source of financing for the parent company. This approach is often used for high credit risk assets such as subprime mortgage loans. The SPV is used to organise and group the assets into tranches which are then sold to meet the specific interests of investors.
A:Companies would look to form an SPV for several reasons. Using an SPV with a separate corporate structure provides risk insulation for the parent company against liabilities and helps protect the parent company’s assets. The SPV also provides an entity through which capital can be raised and regulatory freedom could be obtained to pursue projects with minimal financial exposure for the parent company.
A:Special Purpose Vehicles are often setup by business owners and parent companies to secure financing by allowing investors to collectively pool funds in the SPV rather than invest directly in the parent company. The investors SPV funds can then be used for bulk investment in the parent company or to fund associated projects and initiatives.
This model allows investors to collectively invest in large companies as the amount of funds required by each individual investor can be lower as to funding the large parent company directly. It can also help mitigate investment risks in new start-up companies or high risk projects, which is why the model is often popular with entrepreneurs looking to secure risk-averse sponsors and investors.
A:As with most business ventures there is an associated amount of risk, the same is true of SPV's which is why its important to understand when they should be used.
- Mortgage lenders tend to charge more when lending to an SPV and may ask directors to provide personal guarantees. There are also less lenders willing to offer mortgages to SPV's.
- When transferring existing properties to an SPV, Stamp Duty Land Tax, Capital Gains tax, and legal costs may be owed.
- SPVs do not benefit from capital gains allowance on sale of property
- Depending on how rental profits are drawn dividend tax may be owed.
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