A Special Purpose Vehicle (SPV) is a subsidiary of a company purely set up to isolate financial risk from its parent company. SPV limited companies are usually set up by landlords moving away from a 'buy-to-let' business.
Typically landlords will set up an SPV. Ever since The Chancellor announced plans in 2015 to cut landlord tax relief, the higher-rate taxpayers who own buy-to-let properties will pay more tax. And because of this, increasingly, SPVs are set up by landlords moving away from the buy-to-let business to limited companies.
Other benefits include:
- Paying corporation tax on a limited company (which will be 18% by 2020) could be more beneficial than paying income tax on the property without the tax relief
- Protection of funds and assets
- Personal mortgage deposits can be withdrawn from the limited company by a directors loan (no tax liability)