Can I create an SPV and lease to it, for it then to sublet?

Apologies if this has been asked, but I did search. I’m new to this so please be gentle.

I have a house which has always been let out on an AST. I’ve been offered a tenant who will run the property as an HMO. I am to do the necessary works and obtain a licence before the tenancy begins.

For tax reasons, it would be most advantageous for me to create an SPV (a UK Ltd) to whom I grant a commercial lease at market rate. The SPV will conduct and fund the works, and will then sublet to the HMO company at a profit. The HMO-Co will then do their thing to fill the rooms.

Are there any issues with this from a legal or tax perspective. For example I’ve read that the commercial lease should be < 7 years to avoid an SDLT charge. To be clear, this is only about tax efficiency, and is not an attempt to disguise or misrepresent the true ownership responsibilities.

Hi, you say that you are new to this. Please be exceptionally cautious. Many people have been caught out or scammed in this way. There is a thread for it somewhere.

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I view this as massive risk, however if you are adamant make sure you know how qualified the person you are handing it over to is.

Have they just been on a get rich quick with no money down course which are constantly doing the rounds?!

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The tenant is legit, they are a company who specialise in assisted living accommodation for the elderly. However, my question isn’t about the tenant. My question is about the legality of me creating an SPV to whom I grant a lease and who in turn, sublets to the tenant. Sorry if I wasn’t clear in my question.

There are companies who specialise in this kind of hybrid model, (notably lesstax4landlords). However there are other high profile tax consultants who are very critical of it, (notably the founder of 118 Landlord Forum). You might want to have a read of what theyve written.