Over the past few weeks we’ve been thinking about how to structure our property businesses and this week we’re going to think about whether we should separate our activities into different companies and why.

I’m often asked by investors if they should have just one company and within that company hold some properties for buy-to-lets as well as properties to flip or trade. Whilst it is, of course, technically possible to do this, we need to give some thought to SIC codes and Companies House.

When taking a look at Companies House, you can see that each company has between one and a maximum of four SIC codes. These codes describe the activity of the company. As a result, you may ask yourself if your company should have more than one SIC code – this would mean that your company would be undertaking various different activities within the same company.

But is this the right thing to do? Well, with the changes in the tax landscape of late, I would probably say no.

I set up my limited company many years back when the panorama was very different, and have since bought and held properties as well as traded properties through this same company. But whilst it hasn’t caused me any issues to date, I am likely to come up against problems in the future.

With this in mind I contacted my accountant to ask for advice. I wanted to know what the implications would be today of holding AND trading properties in the same company. His response was quite detailed, but in essence, he advised me to separate my property activities out. Of course, I have taken heed of his advice – and this leads me onto the subject of SIC codes.

SIC codes really only come into play when a company is submitting its first set of accounts, but they are important so let’s give some thought to which codes relate to property businesses. Really, there are only four: 68100, 68209, 68320 and 68310, and here’s a brief description of their classification.

  1. SIC code 68100 is for the buying and selling of own real estate; so, if you’re going to be flipping and trading, this would be the code for you.

 

  1. SIC code 68209 is for the letting and operating of own or leased real estate. In other words, for buying and holding property and renting it out.

 

  1. SIC code 68320 is for the management of real estate on a fee or contract basis. So, for example if you’re going to set up your own management company, then this would be the right classification for you. (As an aside, if you’re going to manage properties for other people or third parties, you should definitely do this in a separate company, and for tax efficiency purposes, you may also consider managing your own properties for yourself but through a separate company).

 

  1. SIC code 68310 is for real estate agencies. In other words, if you’re going to do deal packaging, i.e. if you’re going to source properties for other people.

As you can see, these codes effectively tell Companies House what a business is going to be doing from a tax point of view. (By the way, if you’re going to set up a company with those SIC codes, then that’s the activity that the company has to do – it’s unwise to do otherwise).

SIC codes also play an important role with lenders – again, these codes let lenders know what activity a limited company is going to undertake, and will help lenders assess whether they want to lend to you or not.

In a few of my previous blogs posts I discussed SPVs and explained that when you set up a limited company and approach a lender, the lender will primarily look at you. They will look at whether you are “lendable”, will look at the SIC code of your company, and will then assess whether you and your business activity are a safe bet. So, SIC codes are not only important from a tax point of view, but they also play an important role in obtaining finance for your business.

Here’s to successful property investing

Peter Jones B.Sc FRICS

By the way, I’ve rewritten and updated my best selling eBook, The Successful Property Investor’s Strategy Workshop, which is an account of how I put together my multi-property portfolio, starting from scratch and with no money of my own, and how you can do the same. For more details please go to ThePropertyTeacher.co.uk

21 Replies to “Understanding SIC Codes For Property Businesses”

  1. Can a company that is registered under sic 68320 act as an estate agents and advertise and sell properties

    and

    Do you know how I can get a property maintenance manager, that is refusing to show me the bank statement and explain about 2 substantial withdrawals [I found out about them and I have the cheque numbers.] to do so.

    I am a director of a residential block of flats and it would seem that the other directors are intimidated by him and can’t be bothered.

    He was appointed as the maintenance manager and controls the bank account and is the MD of a local estate agents.

    Your advice please.

  2. To answer your first question Tim a company acting as an ‘estate agent’ will need to have an additional sic code (ie 68310) but your next question sounds more like an internal business issue? I’m sure any Directors of the business could request financial information and under company law, responsibility for the preparation of financial statements rest with the directors. So at least one of you will need access to statements to if anything sign off your annual reports.

  3. Hi Peter,

    Could you advise on SIC code that would cover both flipping and btl under a limited company.

    Thanks in advance

    1. Hi Diana
      for property those are the only 4 SIC codes
      You should have separate SIC codes to cover those activities. 68100 for flipping and 68309 for Btl
      A limited company can have all 4 SIC codes, but your accountant will probably suggest separate limited companies, with separate SIC codes, for each activity
      A (It makes things cleaner for tax purposes)
      And if you apply for BTL finance, most lenders prefer you separate the different activities out
      Hope that helps
      Peter

  4. Hi what SIC code will be requires to run serviced accommodation and management of serviced accommodation for other investors?
    I also would like to source properties can this be done in the same company?

    1. Hi Ash
      Property Secrets are spot on with their answer
      You could of course set up two ltd cos – one for SA and the other for sourcing, each with separate functions and SIC codes – HMRC and your accountant might prefer this, and any lenders you approach will probably be happier with separate companies

  5. Hi Diana, the SIC code for buying and selling real estate property is 68100.

    Ash for serviced accommodation you would need to check ‘hotels and similar accommodation’ more on these here https://www.siccode.co.uk/search/serviced-accommodation and if you are sourcing properties for others you would have an additional SIC code of 68310.

    Remember a company should use more than one SIC code to reflect each of the different activities they cover.

  6. Hi Peter
    We have a management company to manage our own properties but properties owned in our own names.
    The company has accumulated some money.
    Would we be in trouble if the company invested that money in, for example, a loan note with interest returned?
    If the interest income caused us to exceed £85k would we then be liable for VAT?
    Thanks.
    David

  7. Hi David
    I’m sorry but that’s beyond my experience and expertise and is really the province of an accountant and not a surveyor
    Do any accountants reading this post know the answer?

  8. Hi Peter,
    Hope you can help. I own a commercial property which is in my personal name. I have planning permission to build flats therefore I am going to transfer this property to a new business and after the flats are built, I am looking to flip all of the flats into btl mortgages to pull out the equity for the next development project. Which SIC code would be appropriate for this as I am thinking of 68100 but I read your response for Dianna and am now thinking the SIC code should be 68309?
    Thank you
    Izza

  9. Hi Izza
    without fudging this, this really a question for your accountant, but it would seem to me that if you let the properties (which I guess you will if you are putting them onto BTL mortgages) the SIC code would be 68209 which is for the letting and operating of own or leased real estate. In other words, for buying and holding property and renting it out.out. I hope that helps?

  10. Are the HMOs separate to the HMOs or are the HMOs going to be R2R?
    Assuming they are I’d think R2R is 68320 – as you are letting and managing someone else’s property
    But if you own the property (HMOs) you rent out then I guess it’d be 68209
    But don’t forget your accountant will advice you on this (as long as you explain clearly what you are doing) and you don’t need to report a sic code to companies house until you produce your first set of accounts

  11. I have a buy to let business with all four SIC codes included. I want to start property sourcing, should i conduct this activity under my existing company or open another company with the one specific SIC code?

  12. Matt
    That’s probably not a SIC code question – technically you could trade like that
    It’s more a tax question whether you should
    I’m not an accountant and not qualified to go into detail but when I asked my accountant a very similar question he responded I should undertake separate activities in separate limited companies
    But I suggest you ask your accountant and not rely on my rather unsatisfactory lay answer

  13. This article unfortunately doesn’t do what it claims to be doing. No proper explanations of sic codes except copy and paste of what is already stated by the company house. That is the reason of so many questions here indicating that nothing is explained to help the reader know what these codes are?

  14. Hello Peter, nice precise article, but sorry i am still a little confused. In a limited Company, we own several freehold properties, with adjoining garden plots, that we have gained full planning for on split titles. We will instruct a contractor to build these and let them as well as the original properties. In other words our company primary business will be buying, developing and holding property to rent out. Is SIC code 68209 enough on its own or would developing be categorized elsewhere even though we have the same goal of holding and renting. Ideally under this code we would be able to obtain BTL, bit would this be correct please? Many thanks.

  15. I have just setup a Ltd company with the SIC codes 68100 and 68209 and currently in the process of getting a mortgage. At the moment I am not thinking about flipping but just buying and renting properties. Also I have 2 existing BTL properties under my own personal name which I was hoping that they could also be managed by this newly setup Ltd Company. So could I add 68320 to my company too and would it be ok to have all three codes in one company and operate ? Or:

    1. Should i remove 68100 and keep the other two and do as outlined above ? I am assuming that will cause an issue if I am going to buy another property via the Ltd company?

    2. Open another Ltd company just with the SIC code 68320 to manage my personal BTL properties ? Ideally I don’t want to do that after doing a cost benefit analysis?

    Many thanks in advance.

  16. Hi W Gill

    As a general rule it’s worth separating everything out – some (but not all) lenders don’t like you mixing sic codes when it comes to deciding whether they want to lend to you.

    And as you have BTLs in your own name, opening a ltd co to manage them would be a tax efficient move – the Ltd Co would charge you fees at say 10%, on which the Ltd Co pays 19% Corp Tax – you pay less tax in your name at your higher rate because the Ltd Co’s fees are tax deductible from the rent. So I’m surprised your cost benefit analysis didn’t support that?

    Having said all of that I am not qualified to give financial advice and you are asking some very specific questions. So I suggest you talk it through with your accountant who can see your whole financial picture.

    I’d also run it past your broker for the reasons given above re lending

    1. Thanks Peter.

      Opening two Ltd Companies also means increased accountancy expenses (i.e., like £100 per month for each company) plus 19% Corp tax rate, hence cost benefit analysis wasn’t supporting this move.

      As you suggested I will check with an accountant.

  17. I understand
    Knowing whether you save tax and how much is obviously key to making the decision
    But also don’t forget the affect on your ability to raise finance from typical buy to let lenders

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