Reply to: Do I need accountant for SPV?

[TanyaWWW]

Seeking clarity on SPV setup

I've been looking into investing retained profit into (eventually) a few BTL properties, but haven't yet found a good comparison of the options. All tax-efficient options involve an SPV, but how to transfer the deposit is a big consideration

The big question for me - is there any way to set the SPV up and avoid being "associated companies"? If I lose the right for my trading co to be a part of the Flat Rate VAT scheme, I lose at least £6K/year - roughly what one BTL house would gross in rent.

Then how to set things up and transfer the deposit?

1. SPV is a wholly owned subsidiary of the trading co. Deposit transferred from one to the other.
2. SPV has shares in the trading co and deposit is simply paid as a dividend
3. Trading co loans the SPV the deposit - from what I read the SPV then has to pay a commercial rate of interest (not ideal if it's barely turning a profit at the start)
4. SPV becomes the parent company of the trading co - have seen this mentioned, but don't know how a deposit would be transferred

We also have to consider how each option affects the ability for the SPV to get a loan, and liability etc. It's a massive ball ache trying to figure it out - I need an accountant the most before I need to hire one...

- anyone feel like dishing out free advice?

[dx4100]

Interesting response from my accountant...

I just generally asked him his thoughts without probably giving all the required details and he said...

• One property I should do it privately
• when selling the property the first £11,100 of gains (2016/17’s rates) would be covered by the Capital Gains Annual Exemption – if the company made any profit on the disposal this would be taxed
• I may not be entitled to Entrepreneur’s Relief if conducted via your company as it may no longer be deemed purely a ‘trading company’.
• Our advice may change in future due to planned changes to the relief given on personal mortgage interest effective 2017/18. If your rental profits do become significant, it may also be tax-efficient to conduct these through a limited company type set-up.

Like I say, it was a very general and vague inquiry so I wouldn't hold him to this as the question wasn't specific enough but I found the general advice a bit different from our conversation here so thought it was worthy of mention.

Obviously changing from trading to investment has a big impact on your main business. So I need to think about that.

[dx4100]

Ah makes sense. I was thinking spain , tenerife to be exact. but the taxes are ridiculous ... like 15% on the top of the purchase.

I fancy buying in France... but not sure on how to go about it... Job for another day

[diseasex]

Holiday Home.... North Wales is the most likely location... Only a short drive for us.

Ah makes sense. I was thinking spain , tenerife to be exact. but the taxes are ridiculous ... like 15% on the top of the purchase.

[dx4100]

Where do you want to buy this family home?

Holiday Home.... North Wales is the most likely location... Only a short drive for us.

[diseasex]

Thank you for this Darren!

Yes I just came to the same thinking. The property will in fact be handed over to a management company, that is our exact plan and we will probably have a deal where we have it available x amount of time a year. So the BIK will apply to the time frame quite nicely.

Cheers

Where do you want to buy this family home?

[dx4100]

Just had a chat with our tax partner about it, it's all down to the property being "available". So if you had 6 months bookings, in theory it would be "available" for the directors use for the remaining 6 months.

One possible way to negate would be to appoint an agent who would control the bookings and also the keys, in effect making it unavailable for general use other than the couple of weeks that you'd use.

Thank you for this Darren!

Yes I just came to the same thinking. The property will in fact be handed over to a management company, that is our exact plan and we will probably have a deal where we have it available x amount of time a year. So the BIK will apply to the time frame quite nicely.

Cheers

[Darren at Fox-Bartfield]

Holiday Home

Just had a chat with our tax partner about it, it's all down to the property being "available". So if you had 6 months bookings, in theory it would be "available" for the directors use for the remaining 6 months.

One possible way to negate would be to appoint an agent who would control the bookings and also the keys, in effect making it unavailable for general use other than the couple of weeks that you'd use.

[dx4100]

That's correct, it does seem very harsh.

This would suggest I might be alright ?

[ARCHIVED CONTENT] UK Government Web Archive – The National Archives

Although the fact is archived makes you wonder....

[Darren at Fox-Bartfield]

Holiday Home

Well the plan would be that we use it maybe a couple of weeks a year and then its rented out to market for the rest.

Just been doing some reading and its all a bit tulip...

If I use it just once then it becomes BIK and I have to pay the tax based on use of it for the WHOLE YEAR

You can use ESC A91 to reduce the BIK to the period you use it if you offer it other employees. I am the only employee so I presume that isn't an option ?

That's correct, it does seem very harsh.

[dx4100]

You are? Do you have a contract of employment?

Fair point... Directors count though in relation to what I am talking about...

[dx4100]

Strictly speaking yes, it's a BIK. If you bought the property and there was no rental income going through, questions are likely to be asked if HMRC take a look.

Presuming this advice is still valid....

I seem to be ok as long as I am actually trying to rent it out which I will be doing:

[ARCHIVED CONTENT] UK Government Web Archive – The National Archives

So I just need to pay the BIK based on the time I use it....

[northernladuk]

Well the plan would be that we use it maybe a couple of weeks a year and then its rented out to market for the rest.

Just been doing some reading and its all a bit tulip...

If I use it just once then it becomes BIK and I have to pay the tax based on use of it for the WHOLE YEAR

You can use ESC A91 to reduce the BIK to the period you use it if you offer it other employees. I am the only employee so I presume that isn't an option ?

You are? Do you have a contract of employment?

[dx4100]

Strictly speaking yes, it's a BIK. If you bought the property and there was no rental income going through, questions are likely to be asked if HMRC take a look.

Well the plan would be that we use it maybe a couple of weeks a year and then its rented out to market for the rest.

Just been doing some reading and its all a bit tulip...

If I use it just once then it becomes BIK and I have to pay the tax based on use of it for the WHOLE YEAR

You can use ESC A91 to reduce the BIK to the period you use it if you offer it other employees. I am the only employee so I presume that isn't an option ?

[Darren at Fox-Bartfield]

Holiday Home

Strictly speaking yes, it's a BIK. If you bought the property and there was no rental income going through, questions are likely to be asked if HMRC take a look.