An SPV (Special Purpose Vehicle) is a separate legal entity, typically a limited company, created solely to hold specific assets or undertake a particular project, isolating financial risk from the parent company or individual.

For UK agency founders, an SPV is most commonly used when selling your agency. Instead of selling the shares of your trading company directly, you sell the assets of the agency into a newly formed SPV, which a buyer then purchases. This structure can offer significant tax advantages, particularly regarding Entrepreneurs' Relief (now Business Asset Disposal Relief or BADR). By using an SPV, you may qualify for BADR on the sale, which taxes gains at 14% in 2025/26 (rising to 18% from 6 April 2026), rather than the higher rates that could apply to a straightforward share sale. The SPV must be set up before the sale negotiations begin to satisfy HMRC's anti-avoidance rules.

Another use is for property investment. If your agency has surplus cash, you might transfer it to an SPV to buy commercial premises. This keeps the property asset separate from the trading company, protecting it from agency creditors and simplifying any future sale of the agency itself. The SPV would pay corporation tax on rental income at 19% (small profits rate) or 25% (main rate), depending on its profits.

Key practical points for agency founders:

  • Cost and admin: An SPV requires its own bank account, annual accounts, and Companies House filings. Expect setup costs of around £100-£300 and ongoing compliance costs of £500-£1,000 per year.
  • Funding: The SPV must be capitalised properly. HMRC may challenge it as a sham if it lacks economic substance or is underfunded.
  • VAT: If the SPV's taxable turnover exceeds £90,000 (the VAT threshold from April 2024), it must register for VAT separately from your main agency.
  • Dividend tax: If the SPV pays dividends to you, the personal dividend allowance is £500 for 2025/26, with tax rates of 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate).

When this matters for agency founders: An SPV is most relevant when you are planning to sell your agency, want to ring-fence property or high-risk contracts, or need to isolate a specific project from your main trading company's liabilities. Always take professional advice before setting one up, as HMRC scrutinises SPVs closely for tax avoidance.