11 Jan 2024
Property portfolio proved to be a business not an investment
Sanjit & Binu are portfolio landlords, which, defined by the Prudential Regulation Authority, means owning more than three buy-to-let properties. They actually have a portfolio of 14 properties and were advised by their accountant to incorporate the portfolio. This involved creating a new Limited Company known as an SPV (Special Purpose Vehicle) and selling their properties to the Limited Company. This was advised as it is a more tax-efficient way of running their business.
The newly formed Limited Company needed to raise the funds required to purchase the portfolio of property from Sanjit and Binu. As their income was purely from their property portfolio and many of the properties were ex-local authority properties, they struggled to find a lender to assist.
We spent time getting to know Sanjit and Binu as well as their property portfolio helping them put together a portfolio spreadsheet. This made it easier to present their mortgage application to a lender. We were able to secure them the £1.6m required to complete on their purchase. The result being their entire portfolio is now owned under their Limited company and in a much more tax-efficient structure. Following his accountants' advice, they were able to prove to HMRC that their portfolio of property was a business and not an investment, meaning there was no stamp duty or capital gains tax to pay. A very happy couple of property professionals.