A share purchase agreement lets you buy the company that owns a property rather than the property itself. Because you are buying shares, stamp duty is usually 0.5% of the price paid for the shares instead of Stamp Duty Land Tax on the property, and tenancies and contracts carry on unchanged. In return you take on the company’s history and any hidden tax or liabilities, so careful due diligence, specialist legal and tax advice and the right lender are essential.
- 01What is a share purchase agreement?
- 02Buying the shares or buying the property
- 03The benefits
- 04The risks
- 05Financing a share purchase
- 06How we help
01What is a share purchase agreement?
A share purchase agreement, or SPA, is the contract used to buy the shares of a company. In property, it usually means buying a special purpose vehicle (SPV), a limited company set up to own one or more buildings, from its current shareholders.
The property never changes hands. The company stays the registered owner at the Land Registry; what changes is who owns the company. That single difference drives both the benefits and the risks.
02Buying the shares or buying the property
| Buying the property | Buying the company | |
|---|---|---|
| What you acquire | The building only | The company, its assets and its history |
| Tax on purchase | Stamp Duty Land Tax on the price | Stamp duty of 0.5% on the share price |
| Land Registry | New owner registered | No change to the registered owner |
| Tenancies and contracts | Assigned or renewed | Continue as they are |
| Liabilities | Generally left with the seller | Stay with the company you now own |
| Legal work | Conveyancing | Conveyancing plus corporate due diligence |
Simplified. Every transaction should be reviewed by your solicitor and tax adviser.
03The benefits
- Lower stamp duty. Stamp duty on shares is 0.5% of what you pay for them. Because the share price is usually the property value less the company’s debt, the saving against Stamp Duty Land Tax can be substantial.
- Continuity. Tenancies, leases, service contracts and insurance stay in place, which suits let portfolios and blocks.
- Portfolios in one step. Several properties held in one company can be bought in a single transaction.
- An attractive sale for the seller. Selling shares can be more tax-efficient for the seller than selling the property and extracting the cash, which can help you negotiate.
- Existing finance. In some cases the company’s current lender will agree to keep its mortgage in place, avoiding a full refinance.
| Illustration | Amount |
|---|---|
| Property owned by the company | £1,000,000 |
| Company mortgage | £600,000 |
| Price paid for the shares | £400,000 |
| Stamp duty on the shares at 0.5% | £2,000 |
| Stamp Duty Land Tax buying the property directly at the higher rates | £93,750 |
Illustrative only, for a single residential property in England. The actual price will usually reflect the company’s tax position, and other rates or reliefs may apply.
04The risks
- You inherit the company’s past. Unpaid tax, disputes, breaches of planning or building regulations and old debts stay with the company. Warranties and indemnities from the seller help, but only if the seller can pay.
- Hidden tax on a future sale. The company keeps its original purchase price for tax purposes. If the property has risen in value, the company faces corporation tax on that gain when it eventually sells, so a lower share price should reflect it.
- Annual Tax on Enveloped Dwellings. Companies owning residential property worth more than £500,000 may need to file ATED returns, although reliefs are available for genuine letting businesses.
- Higher professional costs. Corporate due diligence and a share purchase agreement cost more than standard conveyancing.
- Fewer lenders. Only some lenders finance share purchases, and they look closely at the company as well as the property.
Structures designed mainly to avoid tax can also attract HMRC scrutiny. Always take advice from a tax specialist before you agree a price.
05Financing a share purchase
There are usually three routes, and the right one depends on the company’s existing mortgage and your plans.
- Keep the existing mortgage, if the current lender agrees to the change of ownership.
- Refinance the company with a new buy-to-let lender, repaying the old mortgage on completion and releasing funds towards the purchase.
- Lend to your own company, which buys the shares and becomes the parent of the property company.
Lenders will want the company’s accounts, details of its directors and shareholders, the rental figures and, often, personal guarantees. Most lending to companies is not regulated by the Financial Conduct Authority.
06How we help
We arrange finance for share purchases alongside your solicitor and accountant, from single-property SPVs to portfolios, and line up lenders that understand them before you commit to a price. See our buy-to-let advice and our Limited Company & SPV Guide for more on company ownership.
Considering buying a property company? Arrange a consultation and we will talk you through the finance options.
Frequently asked questions
What is a share purchase agreement?
It is the contract for buying the shares of a company. In property, it is used to buy the company that owns a building rather than the building itself.
How much stamp duty do you pay on a share purchase?
Stamp duty on shares is usually 0.5% of the price paid for them, rather than Stamp Duty Land Tax on the value of the property.
Is buying the company always cheaper?
Not always. The saving on stamp duty can be offset by tax on future gains, higher legal costs and the liabilities you take on. Advice from a solicitor and tax adviser is essential.
Can I get a mortgage to buy a property company?
Yes, from a smaller group of specialist buy-to-let and commercial lenders, either by refinancing the company or lending to your own company that buys it.
Does the Land Registry title change?
No. The company remains the registered owner, so only the company’s shareholders change.
Is a share purchase regulated?
Most lending to companies for investment property is not regulated by the Financial Conduct Authority, so you do not have the same protections as with a residential mortgage.