Increasingly landlords are choosing to run their businesses through a limited company structure and during the process of registration one question that often arises is What SIC code should you use for your property company?
There are a number of reasons why landlords are choosing to invest in property through a limited company, we highlighted 5 reasons to do so in a recent blog which you can read here.
In this blog, we explain what a SIC code is, what it’s used for and which codes are often used for a property company.
What is a SIC code?
A SIC code is a 5-digit code used to easily identify each company’s main business activities.
Setting up a new limited company in the UK is a relatively quick and easy process and can be done online via Companies House.
All companies must register a relevant SIC code when being set up or Companies House will reject the formation request.
SIC code stands for Standard Industrial Classification code.
There are hundreds of different SIC codes, a full list of which can be found on the Companies House website. Most of the codes for real estate activities are found in Section L.
The majority of businesses will use just one SIC code when forming their company but you can choose up to four SIC codes which can be useful if your business is complex in nature.
Even if a company is dormant, SIC code 99999, or not trading which is SIC code 74990 it will need to have a code registered at the point of incorporation. Should your dormant or non-trading company become active you should update the SIC code on the Confirmation Statement.
What is SIC code used for?
United Kingdom Standard Industrial Classification of Economic Activities, abbreviated to UKSIC or simply the SIC code, is used by Companies House and other bodies to identify a company’s main business activity and to also be able to sort them into categories. Can delete this bit, it’s repeating what was said earlier.
Whilst Companies House and the Office of National Statistics are the bodies that use SIC codes frequently in the process of collection and analysing statistical data and economic activity, the codes are also used by non-government bodies for classifying industrial activities.
Banks and lenders are known to use the SIC code to assess what activity a company is going to undertake to assist them with the decision making process when lending, so could be important if you’re planning to leverage.
SIC code for property investment
There are predominantly two SIC codes used to classify limited companies where its main business activity is property investment and these are 68209 and 68100.
The description for SIC code 68100 is Buying and selling of own real estate. If you intend to buy property to resell this is an appropriate SIC code.
The description for SIC code 68209 is Other letting and operating of own or leased real estate. If you’re buying properties for the purpose of renting them out this is an appropriate SIC code.
We always recommend that landlords seek professional advice to ensure a company is formed and structured in the correct and most efficient way from the outset as if labelled wrong, it’s not uncommon for owners to be denied the right sort of lending.
Investing in property
Whether you already have an established buy-to-let business running and are looking to expand your portfolio or are just setting out, raising capital, forming a property company and considering your options, we would be delighted to share our knowledge of the market and property investment industry as well as our personal experiences. Please do get in touch for a no obligation discussion.