Special Purpose Vehicles (SPVs): how it works, pros vs cons

UK startups pulled in £6.8 billion in venture capital in 2025, spread across more than various businesses.¹ Whether you're raising a funding round or joining an angel syndicate, you'll likely encounter a structure called a Special Purpose Vehicle (SPV).

This guide explains how they work, why investors use them, and how to set one up. For the cross-border payments sidefunding risky ventures, Wise Business handles transactions in 40+ at rates banks can't match.

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Disclaimer: The contents of this article is for informational purposes only and does not constitute legal or tax advice. Decisions related to tax should be made after thorough research, consultation and verification from a qualified financial and legal advisor.

What is a Special Purpose Vehicle (SPV)?

An SPV, also called a Special Purpose Entity (SPE), is a separate legal entity created to make one specific investment. SPVs core job is letting multiple investors pool money for a single deal while keeping that investment legally separate from everything else they own.

If you're raising a funding round or joining an angel syndicate, you'll run into SPVs sooner than you think.

Say 10 angel investors each want to put £20,000 into your Series A. Instead of adding ten names to your cap table, they form an SPV, pool their £200,000, and invest as one shareholder. You get the full amount but only manage one relationship.

For founders, this keeps cap tables clean. Every additional shareholder means more coordination, more agreements to negotiate, more reporting. An SPV turns dozens of investors into a single line item.

For investors, SPVs let you cherry-pick deals. If your angel syndicate's lead investor brings a fintech opportunity you like, you can join that specific SPV without committing to their next 10 deals. You know what you're buying upfront and pay your full stake immediately rather than waiting for capital calls over several years.

SPVs vs. Traditional Venture Funds

A traditional venture capital fund raises money first, invests it later. The fund manager might raise £50 million, then spend the next few years deploying it across 20-30 companies. As a limited partner (LP) in that fund, you're backing the manager's judgment, sight unseen. You can't pick which portfolio companies you want in or out of.

SPVs work backwards. A lead investor finds a company raising funding, negotiates allocation in their round, then invites other investors to join through an SPV. Each investor decides yes or no based on that specific company. No blind pool, no multi-year commitment, no mystery portfolio.

Fund managers use SPVs tactically too. Maybe your main fund is fully deployed but a portfolio company is raising a Series B and you want to follow on. You raise an SPV for that one deal without touching your fund's capital. Or you find a company outside your fund's mandate but still want exposure. An SPV lets you take that bet without breaching your limited partnership agreement.

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Why are Special Purpose Vehicles Used?

SPVs are tools that solve specific problems, mostly around keeping risks contained and accessing money that wouldn't otherwise be available. The reasons vary depending on who's setting one up and what they're trying to achieve, but four patterns show up repeatedly.

Isolating Financial Risk

Say you're a property developer building a block of flats. You set up an SPV to own that project. If the development tanks, your lenders can only go after the SPV's assets. Everything else you own stays protected.

UK infrastructure projects lean heavily on this. Roads, power stations, and hospitals built under Private Finance Initiative (PFI) contracts all ran through separate SPVs. By 2020, over 700 PFI deals operated this way, worth £57 billion.² One failing hospital project couldn't drag down the rest.

Property investors do the same thing. Own three buildings? Set up three SPVs. When one property needs a new roof or loses tenants, the financial damage stops there.

Funding Ventures

Banks won't always lend against your entire business for one speculative project. But they'll lend to an SPV where they can see exactly where their money goes.

Take a wind farm, the SPV owns the turbines and the power contracts. Lenders look at projected electricity sales, not your company's other ventures. If it fails, they can't chase your other assets.

The National Wealth Fund backed Cornish Lithium's exploration project with £24 million in 2023 using this structure.³ Similar arrangements fund heat networks, transport systems, and energy infrastructure across the UK.

Raising Capital Through Securitisation

Banks pool mortgages, car loans, or credit card debt into a Special Purpose Vehicle (SPV), which then issues bonds to investors backed by those loan repayments.

In the UK, residential mortgage-backed securities (RMBS) continue to represent the largest share of securitisation issuance.⁴ A bank originates home loans, transfers them to an SPV, and the SPV sells bonds to investors. Homeowners keep making their monthly payments, but the cash flows now go to bondholders rather than sitting on the bank’s balance sheet.

This gives banks immediate capital to issue new loans while investors receive predictable income from mortgage repayments. Because the loans sit inside the SPV, they remain legally separate from the bank. If the bank fails, the mortgages can continue paying out to bondholders.

Tax and Accounting Benefits

Individual landlords in the UK pay income tax on rental profits - up to 45% for high earners. Buy those same properties through a limited company SPV and you pay corporation tax at 19% or 25% instead.⁵

Mortgage interest makes this gap even bigger. Since 2020, individual landlords only get a 20% tax credit on their mortgage interest.⁶ SPVs still deduct the full amount before calculating profit. If you're a higher-rate taxpayer with substantial borrowing, you're leaving serious money on the table by holding property personally.

SPVs also let companies move assets off their main balance sheet. Transfer property to an SPV, have the SPV issue securities, and suddenly your parent company shows less debt. The leverage ratios improve, which matters when you're trying to attract investors or secure additional funding.

Structures of SPVs

The legal form you pick matters because it affects tax, liability, and how easily you can raise money. UK SPVs typically use one of three structures:

• Private limited company (Ltd) - Most property investors and structured finance deals go this route. You register through Companies House, shareholders only risk what they put in, and the company pays corporation tax on whatever profit it makes. Banks understand this setup, so getting financing tends to be simpler.
• Limited liability partnership (LLP) - You get the same protection as a limited company, but the partnership itself doesn't pay tax. Profits go straight to partners, who then pay income tax on their share. Solicitors and accountants use LLPs constantly, along with property investors who want more flexibility pulling money out.
• Limited partnership (LP) - Someone has to be the general partner, run the show, and take unlimited liability. Everyone else just puts money in as limited partners. Venture funds nearly always use this because pension funds and endowments know how it works, and you don't get hit with corporate tax before distributing profits.

Property buyers go for limited companies to access the lower corporation tax rates and deduct mortgage interest properly. VC syndicates pick limited partnerships because their investors expect that structure and it avoids messy double taxation.

International Structures

Americans typically structure SPVs as Delaware LLCs or limited partnerships. Delaware's business courts have decades of consistent rulings, making the law predictable. Profits usually pass straight through to investors without entity-level tax.

Delaware also allows Series LLCs where one master entity creates multiple independent "series" underneath. Each handles different assets and debts separately, but you only file paperwork once with the state.

Some SPVs use offshore jurisdictions like the Cayman Islands or Luxembourg for tax advantages. These locations work well for international investors, though tax authorities now require genuine economic activity on the ground.

Moving money across borders creates constant friction for SPVs. Wise Business handles payments in 40+ at exchange rates that beat high street banks.

How to Set Up an SPV

Setting up an SPV in the UK works the same way as forming any limited company. The process moves quickly once you know what you need.

Define Your Investment Strategy

Figure out exactly what this SPV will do before you start filing paperwork. Are you buying a single property, pooling investors for a startup round, or securitising a loan portfolio? Your answer determines which structure you pick, what documents you need, and how you explain the business to banks and HMRC.

Choose Your Legal Structure

Most UK SPVs operate as private limited companies. Property investors prefer this structure because of the corporation tax treatment. VC syndicates typically use limited partnerships because institutional investors recognise and expect that setup. Pick whichever structure matches your tax needs and the expectations of whoever’s putting money in.

Register with Companies House

You need a unique company name, at least one director, one shareholder, and a UK registered address. Register online, submit your articles of association, and select a SIC code that describes what the SPV does. Everything costs £50 and usually completes within 24 hours.⁷ You get a certificate of incorporation that proves your company legally exists.

Open a Business Bank Account

This step causes more problems than it should. UK limited companies must keep business finances separate from personal accounts by law. Traditional banks take weeks to open SPV accounts and ask dozens of questions about your business model. Digital banks like Tide or Starling work faster, though they still run anti-money laundering checks and want to understand what you’re doing.

Bring photo ID for all directors, your Companies House registration documents, and a clear explanation of what the SPV will do with its funds. Applications get rejected when answers are vague or incomplete.

If your SPV handles cross-border transactions, pick a provider that simplifies international payments. Wise Business processes transfers in 40+ at actual exchange rates, which saves money compared to what high street banks charge when you’re regularly moving funds between countries.

Register for Tax

Register for corporation tax with HMRC within three months of starting to trade. They send you a Unique Taxpayer Reference that you need for all tax filings. You might also need to register for VAT if your turnover will exceed £90,000.⁸

Maintain Compliance

File annual accounts with Companies House 9 months after your accounting year ends. Your corporation tax return goes to HMRC within 12 months of year-end.⁹ Also submit a yearly confirmation statement to Companies House confirming your company details remain accurate. Missing these deadlines means automatic fines.

What are disadvantages of SPVs?

Despite their benefits, SPVs also has some disadvantages, including:

• Ongoing costs: Accountants charge hundreds to thousands every year to prepare your accounts, file tax returns, and keep Companies House updated.
• Financing constraints: Securing debt through an SPV can be more restrictive than borrowing personally or through a trading company. Lenders often require additional scrutiny of the structure, which can limit flexibility and slow down financing decisions.
• Expensive withdrawals: Take money out as dividends and you pay corporation tax followed by dividend tax. Take it as salary and PAYE plus National Insurance cut into what you receive.

What are alternatives to SPVs?

• Equity crowdfunding platforms: Sites like Seedrs and Crowdcube let you decide where to invest. They sort the legal paperwork, many campaigns qualify for SEIS or EIS tax relief, and you pick companies from their active listings.
• Direct angel investing: This route means buying shares directly from the startup. You negotiate your own terms, might get a board seat, and have real influence over decisions.
• Venture capital funds: You hand over capital and a manager spreads it across 20-30 companies over multiple years. The manager decides which startups get funded, not you.

Crowdfunding fits investors with smaller budgets who want straightforward access. SPVs work when you've found a specific opportunity and want to pool resources with other backers. Direct angel deals or VC funds suit larger deployments where you either want direct control or prefer spreading risk across numerous companies.

Cut International Costs with Wise Business

Running an SPV across borders means paying more than you should on currency exchanges. Say your SPV sends capital to a US company and receives distributions back in USD.

Each time you convert between USD and GBP, high street banks hide markups in their exchange rates, then add transfer fees on top. Wise Business works differently. You pay the mid-market rate without markup

Beyond saving on conversions, your SPV can hold money in 40+ without opening separate accounts in different countries. Wise Business also provides local account details in 8+, which means counterparties can pay you as if you bank in their country (only with Wise Business Advanced).

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*Disclaimer: The UK Wise Business pricing structure is changing with effect from 26/11/2025 date. Receiving money, direct debits and getting paid features are not available with the Essential Plan which you can open for free. Pay a one-time set up fee of £50 to unlock Advanced features including account details to receive payments in 22+ currencies or 8+ currencies for non-swift payments. You’ll also get access to our invoice generating tool, payment links, QuickPay QR codes and the ability to set up direct debits all within one account. Please check our website for the latest pricing information..

FAQs

Is a special purpose vehicle a legal entity?

Yes. An SPV is a separate legal entity registered with Companies House in the UK. It has its own assets, liabilities, and tax obligations independent from whoever created it.

What is the difference between an SPV and an LLC?

An SPV tells you what the company does: it exists for one specific purpose like backing a single investment. An LLC tells you how it's legally structured: it's a business entity that protects owners from personal liability. Most US SPVs get set up as LLCs. UK SPVs typically use the private limited company structure instead.

What is a securitization SPV?

Banks use securitization SPVs to turn loans into tradable securities. The bank pools mortgages or other debt, transfers them to an SPV, and the SPV issues bonds backed by those loan repayments. This frees up the bank's capital for more lending.

Sources used:

1. UK venture funding sources – UKTN
2. ICE briefing paper – ICE
3. Private sector case studies – National Wealth Fund
4. The United Kingdom's 2025 in Structured Finance – Morning Star
5. Benefits of using a SPV company for buy-to-let property – Churchhillknight
6. Gide to section 24 tax changes AXA
7. Incorporation and names – GOV.UK
8. When to register for VAT – GOV.UK
9. Accounts and tax returns for private limited companies – GOV.UK

Sources last checked: 19/12/2025