What are the tax implications of investing via London House Exchange?

Corporation Tax (payable by SPVs)

With London House Exchange, your investment in property is made through a UK Limited Company, via the purchase of an interest in shares. This is called a Special Purpose Vehicle “SPV”, which is established specifically for purchasing that individual property.

The taxable profit made by the SPV is subject to corporation tax, which the SPV will pay directly to the UK tax authority, HMRC. The Corporation Tax rate in the UK is currently 19%, as of December 2022.

In addition, should the property price increase, Corporation Tax is payable on the gain on disposal. This future Corporation Tax liability is recognised in the valuation of the SPV and is called Deferred Tax.

For example, if the property valuation increased by £10,000 over a 5-year period, then £1,900 (£10,000 x 19%) would be recognised as a Deferred Tax liability, which in turn is reflected in the estimated value that we publish for that property’s shares on the platform.

Recognising Deferred Tax is important for ensuring that the investors who have benefited from any property price increases are the same investors that incur the related Corporation Tax.

Stamp Duty Land Tax (payable by SPVs)

Stamp Duty Land Tax (SDLT)  is an amount payable to HM Revenue & Customs on the purchase of property or land in the UK. SDLT is subject to change; for the most up-to-date information please refer to the UK Government’s latest published guidance available here: https://www.gov.uk/stamp-duty-land-tax

The structure through which London House Exchange purchases properties, means that an additional 3% SDLT (the SDLT surcharge) is payable on the purchase of properties. On certain purchases, where multiple units are purchased in a singular or linked transaction, the purchase may qualify for multiple dwellings relief, reducing the overall SDLT liability.  

Other information

We provide all our investors with tax statements, which can be accessed in the Portfolio section of the London House Exchange platform. These are to assist you with any tax returns, and provide a summary of dividends received and capital gains generated over a specified period. The tax statement does not include promotional income such as cashback.

Please note that tax rates are subject to future change, and the above does not constitute tax advice.