What is a SPV?
SPV is also called as SPE (Special purpose entity) which will be a legal entity who will operate for a limited of defined purpose. SPVs are mostly setup as Limited liability companies, how ever SPVs can also being setup as any other type of business such as public limited company (PLC), Limited Liability Company (LLP) etc.
SPV is a very popular method of acquiring properties in the field of property investments and landlords using this method to maximise their return on invested properties and in expanding their business.
Why a SPV should be used?
- Both Income tax and capital gain tax positions can be improved
- Directors will be able to fund the asset and be the decision makers
- There is no limitation about number of properties a SPV can own or number of SPV that can setup
- Interest costs of the mortgages can be set off against the income generated from the SPV
- Considered as an independent company from the parent there for mortgages and properties can be purchased using the SPV’s name
Financial Statements of SPV
The SPV will have its own set of financial statements. Therefore, Assets, Liabilities, Equities, profits or losses will not form a part of the parent company’s financial statements.
From an Investors perspective, before investing in any Parent company or in any SPV the investor should understand the group structure of the parent entity to realize actual financial risk that the investor is going to accept through the planned investment.