Comparing Property SPVs with Direct Ownership: Tax Implications for UK Investors

Of all the choices you’ll make when investing in UK property, arguably the most important is how you’ll own it. You can do it the old-fashioned way and buy in your name or set up a Special Purpose Vehicle (SPV)—typically a limited company, specifically designed to buy and hold property. Both are good and bad, especially for tax purposes. Let’s get it sorted out.

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   Stamp Duty Land Tax (SDLT)

SDLT applies whether you’re buying personally or through an SPV. But here’s the catch: if your SPV buys residential property over £500,000, you’ll get hit with the flat 17% SDLT rate, unless the property qualifies for business relief (e.g., letting or development). Individuals still face higher rates for additional properties, but not as brutal as the corporate rate.

2. Mortgage Interest Relief

This is a big deal. Individuals no longer get to deduct all mortgage interest from rental income—relief only extends to 20%. SPVs, however, continue to deduct finance costs in full before arriving at corporation tax. That’s one main reason why landlords are converting to SPVs. If you plan to set up property SPV limited company formation, this tax treatment is often a deciding factor.

3. Income Tax vs Corporation Tax

Rental income in personal ownership is taxed at your rate, potentially 45%. An SPV is taxed on profit at corporation tax (now 25%). But remember: if you want to draw cash out of the SPV, you may also be required to pay dividend tax (up to 39.35%). So while SPVs may be better at keeping profit, they’re not always cheaper overall.

4. Capital Gains Tax (CGT)

Individuals pay 18% or 24% CGT on residential property when sold. SPVs are not charged CGT—company tax is payable on the profit, which tends to be lower. Even if you’ve got shares in the SPV and you’ve sold them off, you pay CGT on them as well.

5. Inheritance Tax (IHT)

Both are chargeable to IHT. Shareholdings have planning opportunities available, utilising trusts or company structures. However, it is complex, and advice is necessary.

Conclusion

SPVs can offer tax efficiencies, especially for portfolio landlords or reinvesting profit. But one or two properties? Direct ownership is simpler and possibly cheaper. As always, the “right” choice will be down to your long-term goals, and getting the tax wrong will cost you. So please don’t do it yourself on your structure. Whether buying now or planning a set-up property SPV limited company formation, get proper advice early and avoid expensive mistakes.

How Digital Authentication Has Streamlined the Companies House Confirmation Statement Process?

The confirmation system verifies the company details registered at Companies House during incorporation and shown on the register are accurate and up to date. Companies House has streamlined its services, and digital filing is now encouraged as the preferred method.

In larger companies, where one is appointed, the company secretary will file the confirmation statement. Otherwise, the company director or a designated member is responsible for ensuring the statement is filed with Companies House each year. Filing a confirmation statement is a legal requirement and directors who fail to comply can face serious consequences, including fines and prosecution.

The new process compared to old process

Before digital Authentication:

• Confirmation statements (CS01) were mostly submitted on paper.
• Manual signatures and postal submissions would cause delays in the submission process
• Errors in paperwork would require re-submissions, which would cause further delays
• Printing, postage and human resource would be costly.

Now with Digital Authentication

• Confirmation statements can be submitted via the Companies House WebFiling
• Usually, most updates are processed instantly or within 24 hours
• The chances of incorrect filings are reduced as the online system validates entries in real time.
• Filing online is cheaper than paper (£13 vs. £40 per submission)
• Instant email confirmation will be received by companies and track of submission status.
• Digital authentication ensures that only authorised users can make filings which would reduce fraud.

Integration with other systems

• Linked Data sources: Companies House system would often integrate with tax records and HMRC systems which allows for quicker validation for business information.
• Automated Reminders: Reminders like email alerts and dashboard notifications would remind companies when their confirmation statement is due.

Benefits for Businesses

• Digital Authentication is efficient as it would save time for directors and accountants
• Digital Authentication has reduced the risk of late filing penalties.
• Less paper usage and environmental impact would help the business in the long run as well.

Common filing errors and how digital platforms prevent them

• Incorrect or outdated SIC codes: Companies may forget to update their SIC codes when they change their business activities or choose the wrong code. However, digital filing platforms include real-time validation checks which would help in correction of the error.
• Missing or Incorrect Information about shareholders: Companies may forget to list all people with significant control leading to an incomplete or inaccurate statement. Digital Filing Platforms often includes auto-fill sections with previously entered data which would minimise the chance of errors.
• Failure to file on time: File a companies house confirmation statement online by the due date which would result in late filing penalties. Digital Platforms are integrated with automated reminders and deadline notifications, so filing confirmation statement due date would not be missed.