Buying commercial property through a limited company

Buying commercial property through a limited company means the company, rather than you personally, becomes the legal owner of the building and the borrower on any finance. For commercial and industrial property this is the ordinary way deals are done, not the exception: the trading business that will occupy a unit often buys it, and investors very commonly hold each property in a dedicated company. The structure affects tax, the finance available, the deposit a lender wants and the personal exposure of the directors, so it is worth understanding before heads of terms rather than after.

This guide explains how a company purchase works, the difference between a trading company and a special purpose vehicle, the stamp duty and tax position, what lenders want from a corporate borrower including personal guarantees, the deposit and leverage you can expect, and how to decide whether a company is right for you. It expands the brief note on company purchases in our pillar guide to how to buy an industrial unit. We arrange the finance as a broker and introducer; we are not a lender, an accountant or a tax adviser, and the tax treatment of property is genuinely specialist, so nothing here is tax, legal or financial advice. Take advice on the structure before you buy.

Can a limited company buy commercial property?

Yes, and it is commonplace. A UK limited company can own commercial property outright and borrow against it, and lenders across the high street, challenger and specialist markets are entirely comfortable lending to companies for industrial and commercial purchases. In practice a large share of the deals we arrange complete in a company, whether the trading business itself buying its own premises or a separate property company holding an investment. There is nothing unusual or obstructive about the corporate route; it is the default for much of the market.

The company can be one you already trade through or one set up specifically for the purchase. Where the buyer is an owner-occupier, the property often sits in the same company that runs the business, or in an associated company that then leases the unit back to the trading entity. Where the buyer is an investor, the property usually goes into a company created to hold it, for reasons the next section explains. Either way, the company contracts to buy, the company is named on the title at the Land Registry, and the company is the borrower on the mortgage.

What a company purchase does not do is make the buying process itself materially different. The same diligence applies, set out in our guide to commercial property due diligence, the same valuation drives the loan, and the same costs land on completion. The differences are in the tax treatment, the lender's requirements and the directors' personal exposure, which are the subjects of this guide.

What is an SPV and why do investors use one?

A special purpose vehicle, or SPV, is a limited company set up to do one thing: hold the property and, where relevant, collect its rent. It has no trading history, no unrelated liabilities and a simple set of accounts, which is exactly why lenders and tax advisers favour it for investment purchases. A clean single-asset company is easy for a lender to take security over, easy to underwrite, and ringfences the property from the risks of any trading business.

Investors use SPVs for several practical reasons. Each property in its own company can be sold by transferring the shares rather than the building, which can be efficient on exit. Separate companies isolate risk, so a problem in one asset does not contaminate another. And lenders often prefer to see a non-trading SPV with a standard structure, because it removes the complications of lending against a company that also runs an unrelated business with its own debts and creditors. The trade-off is the cost and administration of running a company, annual accounts and filings for each one, which is why portfolios are sometimes held in a small number of SPVs rather than one per unit.

Whichever wrapper you use, set it up early. Lenders will want to see the company, its directors and its shareholders before they can issue terms, and incorporating a company the week before completion creates avoidable delay. We line the structure up with the lender at the start so the corporate paperwork does not hold up the deal.

Do you pay stamp duty buying through a limited company?

Yes. A company pays stamp duty land tax on a commercial property purchase in exactly the same way an individual does, at the UK non-residential rates. There is a common confusion imported from the residential world, where companies buying dwellings face a higher-rate surcharge; that surcharge applies to residential property, not to genuine commercial or industrial property, so a company buying a warehouse pays the same standard non-residential stamp duty as anyone else.

Stamp duty land tax on commercial property: company or individual, the same bands

Slice of the price	Non-residential SDLT rate
Up to £150,000	0 percent
£150,001 to £250,000	2 percent
Above £250,000	5 percent

On a £500,000 industrial unit that produces £14,500 of stamp duty whether the buyer is a company or a person, the same figure either way. Scotland applies Land and Buildings Transaction Tax and Wales applies Land Transaction Tax, both with their own non-residential bands, so the figure changes with the location of the property rather than the legal form of the buyer. Our commercial stamp duty calculator works out the duty on any price.

Where stamp duty does differ in practice is on more complex transactions. Buying a property by acquiring the shares of the company that already owns it can carry stamp duty on shares rather than stamp duty land tax, which is a different and lower rate, and buildings opted to tax bring VAT into the price and therefore into the stamp duty base. These are exactly the points to put to an accountant or tax adviser before exchange, because the saving or the cost can be material and the structure has to be decided in advance.

What do lenders want from a company buying commercial property?

Lenders treat a company borrower much as they treat an individual, but with extra layers because a company has no personal income to fall back on. They underwrite the asset, the directors and shareholders behind the company, and the income that will service the debt, whether that is the trading profit of an owner-occupier or the rent of an investment. They will want the company's accounts where it has trading history, or a clear picture of the directors' own finances and experience where the company is a new SPV.

Two requirements are near-universal and worth knowing in advance. First, lenders almost always take personal guarantees from the directors or principal shareholders, so the people behind the company stand behind the loan and the corporate wrapper does not insulate them from the debt. Second, lenders take a debenture, a fixed and floating charge over the company's assets, alongside the mortgage over the property itself. A purchase through a company therefore involves more security documents and usually a requirement for the directors to take independent legal advice on the guarantees.

Buying through a company changes who owns the building and how it is taxed, but the directors still personally guarantee the loan, so the wrapper rarely removes the personal stake.

The leverage available to a company is essentially the same as to an individual, set by the asset and the income rather than the legal form. Owner-occupier purchases gear indicatively to around 70 to 80 percent of value and investment purchases to around 65 to 70 percent, with indicative rates from around 6 percent depending on the lender, the asset and the strength of the covenant. We match company purchases to lenders who are comfortable with the structure, which matters because appetite for SPVs, newly formed companies and complex group structures varies more between lenders than borrowers expect. See our commercial mortgage and acquisition finance pages for how these facilities are built.

Is it a good idea to buy commercial property through a limited company?

It depends on your tax position, your plans for the property and how you intend to take money out of it, which is why this is an accountant's question as much as a financing one. The case for a company usually rests on corporation tax being charged on company profits at a lower headline rate than higher-rate income tax, on the flexibility a company gives for retaining and reinvesting profit, and on the planning options a corporate structure opens for succession and for bringing in other shareholders. For owner-occupiers, holding the premises in an associated company and charging the trading business rent can also be efficient, and it cleanly separates the property from the trading risk.

The case against is the cost and friction. A company means annual accounts and filings, corporation tax on gains when the property is sold, and a second layer of tax when profit is extracted as dividends or salary. Getting money and property out of a company later can be expensive, and a structure that suits one owner can be wrong for another with different income, plans or family circumstances. There is no general answer, only the right answer for a specific buyer, which is the whole reason this decision belongs with a qualified adviser before heads of terms.

Our role is to arrange the finance once the structure is decided, and to make sure the lender, the leverage and the security fit the company you choose to buy through. We work alongside your accountant rather than in place of them, because the funding and the tax structure have to point the same way. For the wider purchase process, see the pillar guide on how to buy an industrial unit, and consider where the property sits among our multi-let industrial estate and other asset types.