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Cheating the Lender - Nature of Business - trading vs investing

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So looking into registering the Nature of Business for my property corporation, I am coming across a very short list from the Company House:


Section L Real estate activities :

  • 68100 Buying and selling of own real estate
  • 68201 Renting and operating of Housing Association real estate
  • 68202 Letting and operating of conference and exhibition centres
  • 68209 Other letting and operating of own or leased real estate
  • 68310 Real estate agencies
  • 68320 Management of real estate on a fee or contract basis





So essentially whether you are trading properties (buy-refurbish-sell) or investing in property (buy and hold) you will be using code 68100.


My lender is OK to lend to my corporation providing I do not undertake any trading activity and providing the nature of the business of the corporation is only 'investing' and not trading.


But my question is: how can my lender tell if I am trading or investing since the SIC code and registration is the same? Will it be based on financial statement of the corporation or just good faith? Not that I would....but any chance to cheat the lender there? Can I conduct trading and investing with the same corporation without the lender knowing? 



Your advise is welcome.






P.S: this topic is a duplicate of the topic I posted under the 'tax' section - wasn't sure on the best home for it

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Hi Antoine,

You certainly can...but you probably shouldn't.

If your lender finds out, there would likely be repurcussions. In the short term, this could mean that you've broken the terms of your loan, and it becomes immediately repayable. Since the loan would probably be secured on a property, you could lose the property if you do not repay.

In the longer term, good luck with getting any further loans with that lender. It could well affect your mortgagability in other lenders' eyes as well.

That being said, what does your lender class as investing and as trading? This is highly subjective. Probably worth speaking to them to clear this up first (and ensuring you have written consent before you do anything remotely questionable).

While you certainly could get away with it, it's hardly moral, and in my mind not worth the significant risk you'd be taking. Better to set up a second company and trade (new builds?, renovations? Flips?) through that instead.


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