SPV and Limited Company Commercial Mortgages
Buying commercial property through a **Special Purpose Vehicle** (SPV) or **limited company** rather than in your personal name is an increasingly popular strategy for UK property investors and business owners. The structure offers potential tax advantages, liability protection and estate planning benefits, but it also introduces specific lending requirements and costs.
At **Commercial Mortgages Broker**, we advise clients on the most appropriate ownership structure for their commercial property purchases. This guide covers everything you need to know about SPV and limited company commercial mortgages.
What Is an SPV?
A **Special Purpose Vehicle** is a limited company created specifically to hold property. Unlike a trading company that conducts business activities, an SPV exists solely to own and manage one or more properties.
Key Characteristics of an SPV
- Single purpose: The company's articles of association restrict its activities to property ownership and related activities
- Limited liability: The company is a separate legal entity, providing a degree of protection for the directors' personal assets
- Separate taxation: Profits are subject to Corporation Tax rather than personal Income Tax
- SIC code: Typically registered with SIC code 68100 (buying and selling of own real estate) or 68209 (other letting and operating of own or leased real estate)
SPV vs Trading Limited Company
You can also purchase commercial property through an existing **trading limited company**. The key differences are:
| Feature | SPV | Trading Company |
|---|---|---|
| Purpose | Property ownership only | Active business operations |
| Risk isolation | Property ring-fenced from business | Property exposed to business risks |
| Lending | Generally preferred by lenders | Acceptable but more complex |
| Accounts | Simpler, property-only accounts | Property mixed with trading activity |
| Exit/sale | Easier to sell company with property | More complex if selling property alone |
**Key Takeaway:** Most commercial mortgage lenders prefer lending to SPVs rather than trading companies because the SPV structure isolates the property from the risks of the wider business.
Tax Implications of Company Ownership
The tax treatment of commercial property held in a company differs significantly from personal ownership. Always take specialist tax advice before deciding on a structure.
Corporation Tax vs Income Tax
**Company ownership (SPV or Ltd):**
- Rental profits taxed at Corporation Tax rate (currently 25% for profits above £250,000, 19% for profits up to £50,000, with marginal relief between)
- Mortgage interest is fully deductible as a business expense
- No restriction on interest deductibility (unlike residential buy-to-let in personal names)
**Personal ownership:**
- Rental profits taxed at your marginal Income Tax rate (up to 45% for higher-rate taxpayers)
- Mortgage interest is still fully deductible for commercial property (the Section 24 restriction only applies to residential property)
Capital Gains Tax
**Company ownership:**
- Gains on disposal are subject to Corporation Tax
- Indexation allowance was frozen in December 2017 but still provides some relief for properties held since before that date
- Extracting profits from the company triggers additional tax (dividends or salary)
**Personal ownership:**
- Gains are subject to Capital Gains Tax at up to 24% (for higher-rate taxpayers, following 2024 Autumn Budget changes)
- Annual CGT exemption may apply
- Business Asset Disposal Relief may apply for qualifying disposals
Stamp Duty Land Tax
SDLT applies at the same rates regardless of whether the buyer is a company or individual for commercial property. However, the **3% surcharge** that applies to residential property purchased by companies does not apply to purely commercial transactions.
Extraction of Profits
The key disadvantage of company ownership is that profits are effectively taxed twice:
- Corporation Tax on the company's profits
- Income Tax or Dividend Tax when the profits are extracted to the individual
For investors who do not need to extract all profits immediately, the lower Corporation Tax rate allows more funds to remain within the company for reinvestment.
**Key Takeaway:** Company ownership is generally more tax-efficient for higher-rate taxpayers who plan to reinvest profits rather than extract them. Speak to a qualified accountant before committing to a structure.
Lender Requirements for SPV and Company Mortgages
While most commercial mortgage lenders are comfortable lending to companies, there are specific requirements and considerations.
Personal Guarantees
Almost every lender requires the directors and significant shareholders to provide **personal guarantees** for company commercial mortgages. This means:
- Directors are personally liable for the full debt if the company defaults
- The guarantee typically survives the life of the loan
- Personal assets (including residential property) may be at risk
- All directors with 25%+ shareholding are usually required to guarantee
The practical reality is that limited liability protection for mortgage debt is largely theoretical. Personal guarantees are a near-universal requirement in commercial lending to companies.
Company Documentation
- Certificate of Incorporation
- Memorandum and Articles of Association
- Details of all directors and shareholders
- Company bank statements
- Company accounts (if the company has been trading)
- Board resolution authorising the borrowing
Director Documentation
- Personal ID and proof of address for all directors
- Personal bank statements (6 months)
- Personal tax returns (SA302s) for 2-3 years
- Statement of assets and liabilities
- Credit checks on all directors and guarantors
New SPV Considerations
If the SPV is newly incorporated (as is common), the company will have no trading history or accounts. Lenders accept this for SPVs because:
- The company's sole purpose is property ownership
- The property itself provides the income and security
- Personal guarantees from the directors provide additional comfort
- The directors' personal financial strength is assessed instead
How to Set Up an SPV for Property Purchase
Step 1: Incorporate the Company
Register a limited company with Companies House. This can be done online in a few hours for approximately £12-£50.
Step 2: Choose the Right SIC Code
- 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
Step 3: Set Up Company Banking
Open a business bank account in the company's name. Some banks offer dedicated property SPV accounts.
Step 4: Appoint Appropriate Directors
All directors should be UK residents where possible. Some lenders have restrictions on companies with non-UK resident directors.
Step 5: Prepare Articles of Association
Some lenders prefer the standard model articles. Others may want to see property-specific articles restricting the company's activities to property-related purposes only.
Interest Rates and Costs
SPV and company commercial mortgages are typically priced at the same rates as personal name borrowing. There is generally no premium for company ownership:
- Interest rates: Base rate + 2.5% to 6%, identical to personal name lending
- Arrangement fees: 0.5% - 2% of the loan amount
- Legal costs: May be slightly higher due to company-specific legal requirements
- Accounting costs: Annual accounts and Corporation Tax returns are required
Additional Ongoing Costs
- Annual company accounts preparation (£500 - £2,000+)
- Corporation Tax return (typically included in accounting fees)
- Companies House annual confirmation statement (£13 online)
- Company bank account fees
- Registered office address (if not using personal address)
Multiple Properties in One SPV vs Separate SPVs
A common question is whether to hold multiple properties in a single company or create a separate SPV for each.
Single SPV for Multiple Properties
**Advantages:**
- Lower administration costs (one set of accounts, one tax return)
- Simpler management structure
- Potential to cross-collateralise properties
**Disadvantages:**
- All properties exposed to the same company's risks
- More difficult to sell an individual property (company sale not practical)
- Lender security is more complex
Separate SPV for Each Property
**Advantages:**
- Risk isolation (problems with one property do not affect others)
- Easy to sell the entire SPV to transfer property ownership
- Clean, simple lending structure
- Attractive to buyers who can acquire the company rather than the property (potentially saving SDLT)
**Disadvantages:**
- Higher administration costs
- Multiple sets of accounts and tax returns
- More complex personal tax affairs
**Key Takeaway:** For commercial property portfolios, the trend is toward separate SPVs for each property. The risk isolation and ease of disposal typically outweigh the additional administration costs.
Selling Property Held in a Company
When you want to dispose of commercial property held in a company, there are two options:
Asset Sale
The company sells the property to a third party. Corporation Tax applies to any gain, and the proceeds remain within the company until extracted by the shareholder.
Share Sale
The entire company (including the property) is sold. The buyer acquires the shares rather than the property directly. This can offer advantages:
- For the seller: Gains are subject to Capital Gains Tax on the shares (potentially qualifying for Business Asset Disposal Relief)
- For the buyer: May avoid SDLT on the property transaction (though anti-avoidance rules apply to high-value transactions)
Lenders Active in SPV/Company Lending
Most mainstream and challenger commercial mortgage lenders are comfortable with SPV and limited company structures, including:
- High-street banks: Lloyds, NatWest and HSBC all lend to property SPVs
- Challenger banks: Aldermore, Shawbrook, Hampshire Trust, Paragon and Allica Bank have strong SPV lending propositions
- Specialist lenders: Investec, Atom Bank and others cater to specific SPV requirements
How CMB Can Help
We advise on the optimal structure for your commercial property purchase and arrange [commercial mortgages](/services/commercial-mortgages) for SPVs, limited companies and personal name borrowers. Our team understands the nuances of company lending and can ensure your application is structured for the best possible outcome.
[Contact us](/contact) to discuss your SPV or limited company commercial mortgage requirements.
Frequently Asked Questions
Below are the most common questions we receive about SPV and limited company commercial mortgages.
*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*