An SPV, Special Purpose Vehicle, is a standard limited company that has been set up purely to transact for one purpose or transaction.
When you intend to purchase a property or land to build residential or commercial development, it is common for this to be bought in a newly registered company that has no liabilities or other trades. This is to protect the asset from other liabilities or debts any existing company may have.
Additionally, unless the company trades in the same use, then the tax advantages are limited, so again, another reason to open a Special Purpose Vehicle (SPV).
When you develop a property dependent on whether its residential new build, conversion or commercial development, the VAT rules and amounts differ, so another reason to simplify and create a Special Purpose vehicle. The common misconception is that all development is zero-rated, this is not the case, and each type is treated differently. In addition to this, you cannot claim for elements such as kitchen appliances and the hire of certain construction items. The complication of property accounting can be a minefield and needs an experienced accountant in property to advise you.
If you then intend to sell on completely, you have the ability with an SPV of selling the company as opposed to selling the property; again, this varies the tax payable; specifically, this is why you should always use an accountant that has extensive property accounting experience and not let them learn on your development.
Suppose you intend to raise funding or equity on the development as most do. In that case, the Funders or Banks normally require you to purchase the property in a Special Purpose Vehicle so that they can secure their charge not only again the asset but against the company as well.
Due to the complexity of development funding, you should consult a property accountant that can create a cash flow, this will show you how much the interest will cost over time so that you can gain an accurate picture of the potential development profit as well as the issues should the construction go on longer than you planned.