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Non SPV Ltd company in Scotland for BLT


eddiee

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Hello there,

 

I already have a personal BLT, but since I also own a holding company [with SIC 70100] I'm trying to get the Ltd company to buy the properties instead.

 

So far so good, the challenges I have are:

  • Many lenders do not operate in Scotland so most of the information I can find on the net seems very rest of UK focus
  • I like to use the holding company for this, however it seems many lenders require a SPV to do property investment and nothing else. Many specifically require a Ltd company registered with these SIC codes and to operate on those only: 68100, 68209, 68320

 

Has anyone come across these and... any suggestions?

 

My biggest pain is having to create another company (more accounts, more fees, more things to remember for HMRC...). Since I already have a company and in theory I can register 4 SIC codes in total, I was hoping that should be enough but have been told by some lender brokers that it needs to be a SPV

 

Has anyone had similar experience? Any feedback would be great!

 

Thanks

 

Eddie

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Hi Eddie

 

There are a few lenders out there that will lend on trading Limited companies and Scotland:

  • Aldermore Commercial: Not put anything through them for a good while. They are a completely separate company to Aldermore, as Aldermore is regulated in a way that would prevent them from doing much of what the commercial arm do.
  • Shawbrook: The rates are on the high end of the scale. I don't enjoy dealing with Shawbrook and most customer feedback seems to be negative at best so allow lots of time when talking to potential vendors!

 

I can't comment on their other criteria, but they will consider the specific factors you mention.

 

My concern would be where you stand in the future. If you go down this route then you are stuck on whatever each bank will offer after the initial term ends. Their SVR's are high and if you find you cannot remortgage those costs will be huge.

Dont forget that you can set up  limited company on the HMRC website for £18. I  would recommend getting someone to do it for you, but for instance, our accountants charge about £100 to do so. The admin is extra, but with the availability of cloud bookkeeping, the actual work for an accountant is minimal and you often don't need the same level of ongoing advice and assistance that you might with a trading company. Of course, discuss all of this with a tax advisor.

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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Hi Eddie,

 

What was your reason behind your holdings company purchasing the house?

 

As Stuart said, few lenders lend in Scotland, and even fewer to LTDs. So at a risk of being pigeonholed with the handful of lenders waiting for new ones to enter the market, keep it under an individual name.

 

Doing a quick search I found 4 lenders that lend to your tradition LTD; 5 that lend to SPVs and 19 that lend to individuals. 

 

Sit down with your tax adviser, and work out how much you save going through the LTD. Then get a quote on the best deal going through your LTD, and also the best deal Individually and see how much you save going individually, and compare. I think individual will work out in your favour however I'm not a tax adviser! :)

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Thanks a lot for the feedback, really helpful!

 

The reason behind the holding company is because it is the holding company who has the funds, not me personally. 

For what I understand, it looks like the sensible approach would be:

 

Me -> Own 100% Holding company -> SPV Ltd -> Property

 

Although not sure if lenders will want to see the shareholder being another company instead a person. If not I'll have to do it personally and find a way to use funds from the holding company as a deposit for something I would be owning personally.... tricky!

 

I have done a quick comparison for Individual vs LTD mortgage, from now to 5 years (2023) it comes roughly the same (40% tax bracket), either I pay it on tax or I pay it on lenders interest. 

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Hi Eddie

 

Ive tried doing this before and its fraught with problems. Most lenders will definitely not allow another company to be a shareholder in the SPV. The reason is simple, they simply cannot know whats going on in the other limited company, its an issue of transparency.

You can potentially put a loan agreement in place between the limited companies. If it's structured and the lender can see the agreement then some lenders will consider it. The problem is that its only when it gets to legal that this will be agreed. You might find you get an offer, but that at a latter part of the conveyance, the lenders legal team pull the offer and decline the loan because they don't like the details.

To top it all the lenders im talking about are the most expensive, with standard BTL rates in the high 4%, and on commercial repayment terms, so 25 years interest only isn't an option.

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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Hi Stuart,

 

Thanks for the feedback. Yes I understand the reasons, I always thought a good broker would be able to push the case forward... It always amazes me (had previous tough experiences as a company director) the rules lenders use for deciding a Go / no Go approach. At the end of the day is all down to good/bad business plan and management.

 

Anyway, what did you end up doing at the end? I take you had to either go persona or own a SPV personally?

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Yes the clients drew a dividend and directors loaned that to the SPV. We just got mired in endless paperwork, and no clear decisions. We were likely to lose the property if we didn't move forward.

043_logo_final_03.png.0cdf828351f81e6097208048ac2d018d.pngStuart Phillips

Independent, Whole of Market Mortgage Broker

AALTO Mortgages Ltd

Web  www.aaltomortgages.com

Email  sales@aaltomortgages.com

Call  020 7183 1101

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I can believe that! Ok, spoke with my tax accountant, it looks like I'm going to have to be "pigeonholed" into commercial lending directly into the holding company. 

 

The tax repercussions of extracting dividends or director's loans are far bigger than whatever lenders may charge. I guess they know that and make the best of it :) business wise.

 

As you suggested Aldermore Commercial and Shawbrook seem to be the only ones that can work for me. In the past I managed my own personal mortgages with its fair level of back and forth. I'm tempted to go "broker" this time for business... 

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