Set up a company to purchase a house as an investment?

Livealitle

I think I have a fairly tricky / complex set of circumstances and have an idea for investing a small amount of money in property but have no idea if this is viable. Would appreciate anyones input on this. Many thanks in advance.

My circumstances: currently non resident for tax purposes. Currently own 2 properties in Scotland with my spouse but are now separated (very amicable and retaining the properties for now as its not a good market to sell). Currently working freelance and have a very small inconsistent income. Have a relatively small amount of cash that I would like to invest in property as a sole ventrue...in Scotland.

My idea:
1. Set up a Ltd Co (perhaps an SPV which I have just started to learn about).
2. Apply for a Ltd Co or SPV mortgage (downpayment circa £10k with total purchase of circa. £30k

Doubts/Concerns I have and trying to understand further:
1. Are SPVs a "thing" in Scotland?
2. Am I likely to get a mortgage on a newly set up Ltd Co/SPV with no fixed income myself. Could the capital on the existing properties with my spouse be taken into consideration for security on mortgages?
3. Am I likely to get a mortgage for an amount as small as £20k and for such a high LTV?
4. Is this tax efficient?
5. Is this a stupid bloody idea?

Any input the forum experts have on this or personal recommendations of a one stop service provider who I can engage with to answer these questions would be massively appreciated!

Thanks again in advance

Edit: as I think further a Scotland based property isn't essential but preferable. If there is a benefit in doing this elsewhere in the UK I would certainly consider this.

:T:T

anselld

Why do you think Ltd Co is efficient when you are presumably not a high rate tax payer?
It will add to your mortgage cost (if you can get one).
It will incur admin costs.

obay

You'd pay capital gains on your profits! You wouldn't get a mortgage as most lenders want 2/3 years accounts + SA302's to go with it.

Why would you potentially want something that the gov can take away from you?

I'd apply in your own name at least you've got something to show in terms of revenue wise.

davidmcn

Why via a company/SPV? Given the numbers involved, any tax savings seem likely to be outweighed by the costs of setting all of this up and maintaining it.

Also need to bear in mind that lenders don't tend to like dealing with overseas borrowers, your "very small inconsistent income" isn't great to fall back on during voids etc, and no you can't use your other properties as security unless your spouse is prepared to join you in your new venture and grant securities over those properties (I am guessing not!).

anselld

obay wrote: »

You'd pay capital gains on your profits! .

No. The Limited Co would pay Corporation Tax.

silvercar

Doubts/Concerns I have and trying to understand further:
1. Are SPVs a "thing" in Scotland? Yes
2. Am I likely to get a mortgage on a newly set up Ltd Co/SPV with no fixed income myself. Difficult Could the capital on the existing properties with my spouse be taken into consideration for security on mortgages?Personal guarantee? secured on the property. Though the simpler way would be to take a mortgage on these properties to loan money to the SPV to buy the property outright.
3. Am I likely to get a mortgage for an amount as small as £20k and for such a high LTV? 75% LTV, 125-145% rent coverage to interest ratio, minimum may be higher than 20k.
4. Is this tax efficient? Not for someone who has unused tax allowances.
5. Is this a stupid bloody idea? One problem is that with such a low property value the admin/ running costs and hassle are going to make this hard. eg a gas safety certificate is going to be £50 in even the cheapest of areas, but a higher percentage of income in a low value property.

My opinions only, but I can't see the gain being worth the hassle.

Livealitle

Sorry for delayed response on this - I wasn't set up for notifications of responses and missed these until now.

Genuinely appreciate this input and advice! Thanks very much.

I guess I was not fully informed on the tax consequences of the Ltd Co route. My main thought behind that was not to increase the tax efficiency of the solution but to hopefully 'safeguard' any property I owned until a legal separation is in place with my spouse with regards to existing properties we own. I really wanted to start investing the pot of savings I have in the meantime and thought this might be a good idea.

Sounds like I need to get back to the drawing board but this has been very helpful..thank you!