What is an SPV?
A Special Purpose Vehicle (SPV) is a limited company created for a single purpose — in property development, that purpose is to buy the land, carry out the development, and sell or retain the completed units. The SPV has no other trading activity, no employees (usually), and no history. It exists solely for the project.
Almost all development finance lenders require borrowing through an SPV. This isn't optional — it's a standard requirement of development finance structuring.
Why lenders require SPVs
- Ring-fencing: The development's assets and liabilities are completely separate from your other businesses or personal finances. If the development encounters problems, your other assets aren't at risk (beyond any personal guarantee). If your other businesses have problems, the development isn't affected.
- Clean security: The lender takes a first charge over all the SPV's assets — the land, the development, and any sales proceeds. Because the SPV has no other activity, there are no competing creditors.
- Transparency: The lender can see exactly what's happening in the project by looking at the SPV's bank account and records. No mixing with other business activity.
- Exit simplicity: When the development completes and units are sold, the SPV's purpose is fulfilled. It can be wound up cleanly, or retained if you're keeping units.
How to set up a development SPV
Step 1: Incorporate at Companies House
Register a new limited company at Companies House (gov.uk/register-a-company). Cost: £12 online. The company name often reflects the project — e.g., "123 High Street Developments Limited" — but this isn't required.
Step 2: Choose the right SIC code
Use SIC code 41100 (Development of building projects) or 68100 (Buying and selling of own real estate). Lenders check this, so get it right.
Step 3: Set up the share structure
Standard setup is 100 ordinary shares at £1 each. If there are multiple developers, allocate shares to reflect the profit-sharing arrangement. Your accountant can advise on the optimal structure.
Step 4: Open a bank account
The SPV needs its own bank account. Some banks are slow to open accounts for new SPVs — start this process immediately after incorporation. The development finance lender will require all funds to flow through this account.
Step 5: Register for Corporation Tax
Register with HMRC for Corporation Tax within 3 months of starting business activity (typically when the land is purchased).
SPV vs personal name vs trading company
- SPV (recommended): Required by most lenders. Clean ring-fencing. Corporation Tax at 25% on profits. Standard for development finance.
- Personal name: Very few development finance lenders will lend to individuals. No ring-fencing. Higher personal tax rates. Not recommended.
- Existing trading company: Some lenders will accept this, but it introduces risk — the development's liabilities sit alongside your other business activities. Most lenders prefer an SPV.
Tax considerations
SPV profits are subject to Corporation Tax (25% in 2026). Profits extracted as dividends are then subject to personal dividend tax. Development profits in an SPV are treated as trading income, not capital gains — so Entrepreneurs' Relief / Business Asset Disposal Relief doesn't apply. Consult a property tax specialist before choosing your structure.
Applying with an SPV
When you submit a deal on Assesr, specify your SPV as the borrower. Because SPVs have no trading history, lenders assess the directors' personal experience, net worth, and track record instead. The AI credit paper presents this clearly, showing lenders the people behind the SPV alongside the deal fundamentals.