Property developments and SPVs

Many of our clients have asked, how do I transfer a property into a SPV?

Firstly, when buying a property for development, it would be much easier to put the property into a chosen SPV.

But if this has not happened, then what can you do? One alternative is to transfer the property to a subsidiary in a corporate group.

On this type of transfer, there is not currently any stamp duty land tax (care is needed to review the anti-avoidance legislation) and no capital gains tax as a corporate transaction, but there could be corporate tax liability. There are various elections and claims which can defer the corporate tax but there is no election if the property moves from stock to fixed asset.

VAT is another issue which needs to be considered for VAT purposes, as this creates a sale and purchase. So, if the property is subject to VAT (opted for VAT) then advice is needed to try to find a resolution. There is a high likelihood of a VAT charge on the transfer with a reclaim by the SPV (who has to be VAT registered and opted to tax the property).

Transferring a property into an SPV from personal ownership is much more difficult, especially if the property is to be transferred to a limited company, hence it may be an idea to look at using an LLP when moving the property for protection purposes.

Before undertaking any property movements, it is important advice is taken to ensure the various taxes do not create a significant tax issue.

The next step

 If you have any questions regarding this insight, please contact Clive Gawthorpe, or your usual UHY adviser.

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