What is Special Purpose Vehicle (SPV)?

Definition: A Special Purpose Vehicle (SPV) is a limited company incorporated solely for the purpose of holding property investments. In HMO finance, SPVs are the dominant vehicle used by serious investors and are typically registered at Companies House with an SIC code of 68209 (letting and operating of own or leased real estate). The primary driver for using an SPV is the favourable tax treatment of mortgage interest: unlike individual landlords, who lost mortgage interest tax relief between 2017 and 2020, a limited company can still deduct mortgage interest as a business expense before calculating corporation tax (currently 19–25%). This can substantially improve after-tax cash flow, especially for higher or additional rate taxpayers. From a lending perspective, SPV mortgages are assessed on the company's projected rental income rather than the director's personal income, though personal guarantees are almost always required. Most specialist HMO lenders offer products for SPVs, though rates are typically 0.1–0.5% higher than equivalent personal-name products to reflect the additional legal complexity. Investors must also consider one-time setup costs, accountancy fees, additional SDLT obligations when transferring existing properties, and the complexity of extracting profits tax-efficiently via salary and dividends.