What SIC Code Should I Use For My Property Investing Limited Company?

What SIC code should I use for my property investing limited company?

What is a SIC code? Standard Industrial Classification (SIC) of Economic Activities is a way used to classify different businesses by the type of economic activity they are involved in. It is used by Companies House to define what your business does.

How many SIC codes can I have? A company can have more than one SIC code. In fact a company can have up to 4 if it is engaged in different types of economic activity. This may be more common for larger companies who have diversified into different areas of economic activity as they have grown. 

What SIC codes do property companies use? There are 5 main SIC codes used by property companies.

68209 - letting and operating of own or leased real estate. Investment companies for holding property and renting it out generally over the long term. 

68100 - buying and selling of own real estate. This would be used by companies which conduct buy-refurbish-sell and property trading activities.

68320 - management of real estate on a fee or contract basis. This would be for property management companies such as letting agents.

68310 - real estate agencies. This would be used by deal packagers and property sourcing companies.

55100 - Hotels and similar accommodation. This can be used by serviced accommodation providers and for holiday lets. 

When do I decide what SIC to use? When you set up a limited company using the .gov website you will be required to include details of which SIC codes best define your business.  Don’t worry too much if you get it wrong, this can be changed when you submit your annual confirmation statement, which is a requirement for all limited companies on an annual basis.

What SIC code should I use as a property investor? You should refer to the list above and choose the SIC code which best describes your property company. To answer this question specifically for property investors we will assume that it is your intention to buy property with the purpose of holding it from the long term as a means of growing wealth. You may occasionally sell the odd property and take a taxable gain but the primary purpose remains to buy and hold for the long term. You may also use this company to manage the properties that are held within the company. In this case you should probably choose 68209 - letting and operating of own or leased real estate as your SIC code.

Common Mistakes. I see quite a lot of property investment companies with multiple SICs - There is no need! If you are buying property to hold for the long term then stick with 68209, same detail for the different property companies listed above. It would rarely be a good idea to conduct each of the different property strategies above in the same company but always take advice from a professional before starting any new property business venture. 

Who cares? 

Companies House will want you to use the correct SIC code that defines your business but there is another key stakeholder to be aware of. Assuming you want to use leverage in order to grow your property company you will need to use mortgages to finance your property purchases. 

Mortgage lenders can be picky about which SIC codes you use and therefore it is important that you get it right. It is advisable to therefore ensure you speak to an accountant and mortgage broker before choosing your SIC code.

HMRC Different property companies are viewed differently by HMRC for the purposes of taxation. Property investing companies do not qualify for some of the same reliefs as trading companies for the purposes of Capital Gains Tax. It is therefore important that you ensure your SIC code is correct from a tax planning perspective. 

Conclusion. SIC codes define what your business does and are important to a variety of stakeholders including mortgage lenders, HMRC and Companies House. There are 4 main SIC codes used by property companies and it is important that you select the one that best describes your business. The most suitable SIC code for property investors who are following a buy and hold strategy is usually 68209 - letting and operating of own or leased real estate.

Setting up a company can be a bit of a minefield for some people - If you want assurance from a professional that you are doing it correctly then please contact us.

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