Buy-to-let via subsidairy spv

[rahulbsp]

Hi,
Would like to know if anyone has done buy to let via subsidiary SPV. If yes can you please provide lenders details.
So I have a
1) company A- IT consultancy where my wife and I are directors and 50% share holders each.
2) Company B- SPV for BUY TO LET, where my wife and I are directors , but my company A is 100% share holder.

Now my accountant says this is the most efficient set up , but the lenders are refusing as they say they can lend to a normal SPV but not to a subsidiary SPV.

[BrilloPad]

Have you contacted a mortgage broker?

[Neil@Intouch]

Just a note on your current set up. This would in fact be the wrong way round for the shareholding, as you have listed Company A having shares in Company B.

Company B should have shares in Company A to allow dividends to be transferred from the trading profit of Company A to help fund the buy-to-lets in Company B. Preferably a different class of shares to give flexibility on the value.

[Jazzman]

Hi Rahul

There are some lenders who can deal in that way such as fleet group mortgages. They only deal with brokers only directly not individuals (or Ltd company).

Neil can you expand a little more on that post? It won't be a dividend but capital redistribution if the OP continued as is?

I have been told to go the way of forming a holding company and two subsidiaries one for IT Ltd and Property Ltd.

Money in existing Limited company - Accountants Advice - The Property Hub this a good read has both approaches discussed.

I am leaning towards a holding company only because the companies will be treated independently rather than any misfortune on my IT Ltd company could then bear on the property lord Co if it was a subsidiary of the IT Ltd Co.

I could be wrong as I have found every accountant and mortgage broker will only deal with what they know.

[Neil@Intouch]

Neil can you expand a little more on that post? It won't be a dividend but capital redistribution if the OP continued as is?

I have been told to go the way of forming a holding company and two subsidiaries one for IT Ltd and Property Ltd.
http: //thepropertyhub.net/forum/topic/5227-money-in-existing-limited-company/ - Money in existing Limited company - Accountants Advice - The Property Hub this a good read has both approaches discussed.

I am leaning towards a holding company only because the companies will be treated independently rather than any misfortune on my IT Ltd company could then bear on the property lord Co if it was a subsidiary of the IT Ltd Co.

I could be wrong as I have found every accountant and mortgage broker will only deal with what they know.

Having Company B with shares in A, will allow any profit to be distributed in way of dividends, utilising the franked investment income (dividends between companies). Having this set up will protect the profits in the trading company and allow for any retained profit to be transferred to company B to use for investment funding.

This advice is based on the structure of the company's and how to make best out of both.

[independent]

Hi,

I am also planning to form a SPV for buy to let. My intention is to provide a loan (at HMRC prescribed rates - 3% currently) from the IT Ltd to Property SPV.

In that case, can that Property SPV just be opened as a normal SPV, without any subsidiary / holding company kind of relationship to IT Ltd?
Or are there any advantages of going via that subsidiary / holding company kind of structure?

All inputs most welcome.

[Neil@Intouch]

Yes this can be done as an inter company loan, but if you have retained profits that aren't required in the trading company, then this can be transferred as a dividend to the SPV to help fund the buy-to-let properties.

[independent]

Thanks Neil.

Yes, I have retained profits that are not required in the trading company.

Can you please elaborate a bit more about transferring the retained profits as dividends? Will that be a different class of shares, as I wouldn't want to take the same dividend myself? How does the taxation of those dividends work?

What are the advantages of using the dividend option over loan, and what is the relationship structure you would suggest between the trading company and property company (to avail that dividend option most efficiently)?

In either case, what are the other aspects I should be keep in mind, while deciding the structure? Does this in any way impact the eligibility for entrepreneur relief for the trading company going forward? Is there a way the new SPV would also be eligible for entrepreneur relief when (if) closed in future?

Are there any IHT related implications I should be aware of?

Sorry, asking too many questions. It is a very important long term arrangement for me, so want to make sure I think through all aspects and all options before deciding.

Of course, I have started discussions with my accountant in parallel too. At times, they might be keener towards what they are more comfortable with and what they have done before with other clients, so trying to do as much research as possible myself too.

Many thanks.

[Neil@Intouch]

Thanks Neil.

Yes, I have retained profits that are not required in the trading company.

Can you please elaborate a bit more about transferring the retained profits as dividends? Will that be a different class of shares, as I wouldn't want to take the same dividend myself? How does the taxation of those dividends work?

What are the advantages of using the dividend option over loan, and what is the relationship structure you would suggest between the trading company and property company (to avail that dividend option most efficiently)?

In either case, what are the other aspects I should be keep in mind, while deciding the structure? Does this in any way impact the eligibility for entrepreneur relief for the trading company going forward? Is there a way the new SPV would also be eligible for entrepreneur relief when (if) closed in future?

Are there any IHT related implications I should be aware of?

Sorry, asking too many questions. It is a very important long term arrangement for me, so want to make sure I think through all aspects and all options before deciding.

Of course, I have started discussions with my accountant in parallel too. At times, they might be keener towards what they are more comfortable with and what they have done before with other clients, so trying to do as much research as possible myself too.

Many thanks.

Yes you would set up the investment company as a different class shareholder in the trading company. Then the trading company can transfer the retained profits from this company to the investment company. This is classed as franked investment income (dividends between company's), which isn't taxable.

A loan would need repaying when either of the company's were wound up, which might not be a problem, but just makes sense to use the approach above, as doesn't impact your personal or company bill.

Happy to discuss this further with you, but easier to chat via phone than on the forum. As you have said you have started talking with your current Accountant, so might be worth continuing this conversation with them.

[independent]

Thanks for the pointers Neil. Will discuss further with my accountant and see what he says.

One quick question - do you reckon giving a loan or franked investment income to the property company, would put the entrepreneur relief for the IT company in doubt? (i.e. is there a risk of the IT company being classified as investment company due to this loan or franked investment income?)

Many thanks.