Adrian Moloney | 03.08.2020
Your clients may be considering the way they run their rental portfolio and exploring the option of managing it through a limited company for tax efficiency.
One of the options available is to manage the portfolio within a special purpose vehicle (SPV) limited company. A non-trading SPV can hold all or part of the client’s buy to let portfolio, allowing them to incorporate their existing portfolio from direct ownership to a limited company set up. However, your client should seek independent specialist tax advice before making any decision.
If your clients are considering this, we could support them.
Please be aware that the directors on the new limited company must be the same individuals that are named on the current mortgage. If not, the request will have to be submitted as a new application, and therefore won’t be party to the process.
We’ve put together a quick rundown of what is required for the submission of SPV cases. In most instances, the following conditions and process will apply:
Your client must supply you with the following information, which you must pass on to us:
1. Details of the mortgage account(s) that they want to include in their legal transfer request.
2. A cheque for made payable to ‘Kent Reliance for Intermediaries’ to cover our administration fee (this is payable for each account).
3. Details of the client’s limited company: company name, registered address, registration number, date commenced trading, director and shareholder details (including the percentage of business owned by each shareholder).
4. The client must confirm whether they wish to increase their borrowing to cover the stamp duty, capital gains tax and legal costs applicable, which will be subject to affordability checks and product limits.
Please make them aware that the stamp duty and capital gains tax liabilities amounts must be clarified in writing prior to their offer. Please note that it is the applicant’s responsibility to ensure all relevant taxes applicable to the transaction are paid.
5. If the product needs to be changed, the applicant may choose from our buy to let specialist range, and will receive a 50% reduction on the product fee as advertised on our website.
If the client is currently on a fixed-rate mortgage, then they must choose a new fixed rate from the range, as their current early repayment charges (ERC) will be waived. If the client is on a discounted variable rate with no ERC, then the full range is available to them.
6. A copy of their existing assured short hold tenancy for the property.
7. Contact details of their instructed solicitors.
8. Completed direct debit form for the limited company.
It’s also worth noting that you’ll need to complete an authorisation form and forward all of the above information to us.
If a client wishes to raise capital above the stamp duty and capital gains tax, it falls under the normal case submission process that new clients must follow.
Once we have assessed the client’s case, they’ll be sent a mortgage offer, which must be signed and returned to us in order to complete their request. We also require an authority form from you, so that you can receive your procuration fee.
Our general requirements on limited company loans are for each director to enter into a personal guarantee and seek independent legal advice in respect of this.
We’ll also need to instruct external solicitors to act on our behalf, and they’ll be responsible for any legal fees incurred on this matter. We can provide them with details of fees upon request.
Please note that if you’re new to doing business with us, you’ll need to submit a new application through our broker portal.
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