How to Use Multiple Share Classes in a Property SPV (& Why You Should)

The UK property market has been a magnet for investors for a long time who are seeking stable returns, long-term capital growth, and wealth preservation. However, as regulations tighten and taxation becomes more complex, many landlords and developers are rethinking how to structure their portfolios. One strategy that has gained traction with investors is the use of Special Purpose Vehicles (SPVs) and within that, the use of multiple share classes to optimise ownership, tax, and flexibility.

At its core, an SPV is a limited company created to own and manage property. It is a separate legal entity often used to limit liability, attract finance and act as ring-fencing. But while forming an SPV is a relatively simple process, structuring it well is a difficult task altogether. That is where multiple share classes come in.

This article dives deep into how multiple share classes work within a property SPV, when and why you should use them and practical steps for implementing them. Whether you are seasoned landlord, a hands-on developer, or a new investor looking to bring in partners or family members, this guide will help you understand how to use company shares not just as proof of ownership, but as a vehicle for growth, flexibility, and control.

What is a Property SPV?

An SPV (Special Purpose Vehicle) is a limited company set up to hold property and isolate financial risk. The SPV will have a separate legal status to your existing business and hence its financial activities are not shown on your overall business’s balance sheet. In the UK, SPVs are commonly used by buy-to-let landlords and property developers. Some of the reasons for the using of property SPV are:

• Simplified tax calculations
• Easier lending criteria from buy-to-let lenders
• Separation of property portfolios from personal assets

Most SPVs are structured as private limited companies (Ltd), with shareholders owning shares and directors managing day-to-day operations.

What are Share Classes?

Share classes refer to the designation applied to a specified type of security. It distinguishes shares with different rights, privileges, and restrictions which are commonly used in both public companies and mutual funds. Companies that have more than one class of common stock usually identify a given class with alphabetical markers, such as “Class A” shares and “Class B” shares; these carry different rights and privileges.

By default, a company has ordinary shares; equal rights to voting, dividends and capital return. But this default can be adapted by issuing different classes of shares, such as:

• A shares: Full voting and dividend rights
• B shares: No voting rights, but eligible for dividends
• Alphabet shares (A, B, C, etc): Tailored for different investors
• Preference Shares: Fixed dividends, often without voting rights
• Redeemable shares: Can be bought back by the company

Each share class can be customised through the company’s Articles of Association or Shareholders’ agreement to meet specific needs.

Why Use Multiple Shares Classes in a Property SPV?

• Flexible Profit Distribution

In a company, different shareholders might want different returns. Multiple shares classes allow dividends to be declared selectively.

Example:

If Taylor as an investor holds A shares and Travis as an investor holds B shares, the company can declare a dividend only for A shares, allowing precise distribution based on performance, capital contribution, or strategy.

This avoids the need to allocate profits strictly based on ownership percentage which is ideal for:

1. Silent partners who want a fixed return
2. Active investors who want profit sharing
3. Retained earnings for reinvestment

• Tax Planning and Income Splitting

Multiple share classes make it easier to allocate dividends to different people in a tax-efficient way.

Example:

Spouse A (higher rate taxpayer) owns A shares, while Spouse B (basic rate taxpayer) owns B shares. Dividends can be paid only on B shares, optimising tax with the family unit.

There is a legitimate form of income splitting, especially when shares are structured with no voting rights (to avoid failing foul settlements legislation) and proper documentation is in place.

• Control and Decision Making

Sometimes it may be beneficial to separate voting rights from economic interest: 

1. Directors can be able to issue non-voting shares to family members or passive investors
2. You can retain control of the business even if others hold equity

Example:

A property developer retains 100% of voting A shares, while giving 40% of the economic interest to a joint-venture investor via non-voting B shares.

This approach maintains leadership control while welcoming capital investment.

• Succession Planning and Gifting

Alphabet shares can make gifting shares to children or family more manageable.

Example:

A landlord sets up an SPV and gives different share classes to each child, allowing future income allocation or ownership transfer without changing the main company structure.

This enables:

1. Gradual wealth transfer
2. Control over timing and value
3. Tailored inheritance strategies

• External Investment and Joint Ventures

Investors may want a clear way to get returns without being involved in management. Issuing different share classes allows:

1. Investors to hold preference shares with fixed dividends
2. Developers to retain voting shares
3. Joint-venture partners to receive returns based on contribution

This reduces disputes and aligns incentives.

Example:

Investor C contributes £200,000 to a refurbishment project and receives 25000 preference shares with 8% annual dividend. The developer keeps 100% of ordinary shares with control over the SPV.

How to Set Up Multiple Share Classes

Setting up multiple share classes in a property SPV is not as simple as issuing different labels like “A shares” or “B shares”. It also involves proper legal structuring, formal documentation and clear communication between shareholders. It allows you to distribute profits flexibly, preserve control, and accommodate different types of investors or family members if it is applied correctly.

Here is a step-by-step guide to setting up multiple share classes in your SPV.

Step 1: Understand Why You Need Multiple Share Classes

Before making any changes, clarify the strategic purpose of introducing new share classes. For example:

• Do you want to split income between family members?
• Are you bringing in investors who require fixed returns?
• Do you want to separate control (voting rights) from profits (dividend rights)
• Are you planning long-term succession or inheritance?

Knowing the goal helps shape how each class is defined especially around voting rights, dividends and capital rights.

Step 2: Review or Amend the Articles of Association

The Articles of Association are the legal rulebook for your company. If you want to issue multiple share classes, the Articles must explicitly allow for different rights attached to those shares.

You have three main options:

• Option 1: Amend Existing Articles

If your company is already set up using the default Model Articles, you will need to amend them. This is done by passing a special resolution (75% shareholder approval) and submitting the revised Articles to Companies House.

• Option 2: Adopt Bespoke Articles at Incorporation

If you are forming a new SPV, you can start with customised Articles of Association that already includes the different share classes you need which saves time and future amendments.

• Option 3: Use Professionally Drafted Templates

For Property SPVs, many accountants, solicitors, and company formation agents offer pre-approved templates that are SPV-friendly and include provisions for alphabet shares (e.g., A, B, C).

Step 3: Define the Rights of Each Share Class

This is a critical legal step. Each class of shares must be clearly defined in terms of the following:

Share Right	Possible Variations
Voting Rights	Full, Limited or None
Dividend Rights	Equal, Fixed, Discretionary, or None
Capital Rights	Share of assets on winding-up (Equal or Preferential)
Redemption Rights	Can the company buy back the shares later?
Transfer Rights	Can shares be sold or gifted? With or without approval?

Example:

• A shares: Full voting + dividend rights (for directors)
• B shares: No voting, discretionary dividend (for spouse)
• C shares: No voting or dividend (reserved for future gifting to children)

Step 4: Update Shareholders’ Agreement (If applicable)

A Shareholders’ Agreement is a private contract between shareholders that outlines how the company is run and how decisions are made. While optional, it is strongly recommended when there are:

• Multiple investors or partners
• Family members involved in ownership
• Different classes of shares with unequal rights

Use the agreement to set out:

• How dividends will be decided
• What happens if someone wants to sell their shares
• Who has control over decisions (voting thresholds)
• Exit plans, disputes, or buyback rights

This agreement protects all parties and ensures clarity beyond what is written in the Articles.

Step 5: Issue or allot the new shares classes

Now that your articles and agreements are ready, you can issue the new shares:

• For new companies
• Assign shares classes at incorporation
• Use IN01 form or online incorporation system
• For Existing Companies
• Pass a board resolution to issue new shares
• File form SH01 with Companies House (within one month of allotment)
•  Update the share register and share certificates.
• If transferring shares, use Form J30 (stock transfer form)

You must also update the company PSC (Person with Significant Control) register if new shareholders gain more than 25% of shares or voting rights.

Step 6: Inform HMRC and Consider Tax Implications

Issuing or transferring shares may have tax consequences, especially when:

• Shares are gifted or transferred at undervalue
• Family members are invited (settlements legislation)
• Preference shares or dividend planning is used

Actions to take:

• Get a share valuation if shares are being transferred
• File a Form 42 if shares are issued to employees or directors (where applicable)

Step 7: Maintain Accurate Company Records

Ensure your company records reflect the new structure:

• Update the Register of Members
• Record share class allocations in the Company’s Annual Confirmation Statement
• Keep copies of board resolutions, shareholder agreements, and updated Articles in a secure register.

Tax Considerations When Using Multiple Share Cases

While multiple share classes in property SPV offers significant benefits such as flexible profit distribution and succession planning; they can also trigger a variety of tax implications. This section outlines the key tax considerations you need to understand and plan for when implementing a multi-class share structure.

• Dividend Tax and Income Splitting

Dividends paid from an SPV to shareholders are subject to dividend tax on the individual receiving them. The ability to pay dividends selectively to different share classes is one of the major advantages of alphabet shares.

• Settlements Legislation

The settlements legislation is one of the most important tax issues in family owned SPVs using multiple share classes.

These rules may apply where:

1. Income is diverted to a spouse or child who is a lower taxpayer
2. That person did not contribute financially to the business or pay market value for the shares
3. The arrangement has the effect of retaining control while shifting taxable income.

• Capitals Gains Tax (CGT)

Changing share ownership by gifting shares to family or selling them may trigger Capital Gains Tax, especially if the shares have increased in value.

Gifting shares:

1. To a spouse or civil partner: No CGT, as transfers between spouses are exempt.
2. To children or others: This is a disposal at market value, which could trigger a capital gain.

• Inheritance Tax and Family Planning

 Using alphabet shares can aid inheritance tax planning:

1. You can gift different classes of shares to children without transferring control.
2. You can freeze the value of your estate by giving away non-voting growth shares.

Risks and Challenges of Using Multiple Share Classes

While the use of multiple share classes in a property SPV can unlock flexibility and significant tax planning opportunities, it also introduces legal, operational and tax-related risks.

• Increased Legal Complexity

Unlike standard single class share structures, companies with multiple share classes require precise legal documentation. This includes:

1. Amended or bespoke Articles of Association
2. A robust Shareholders’ Agreement
3. Correct issuance and registration of shares

If these documents are unclear, inconsistent or missing key provisions, it can lead to internal disputes, legal exposure or HMRC scrutiny.

• Disputes between shareholders

Share classes are often introduced to accommodate different interests such as active v/s passive investors or parents v/s children. However, these distinctions can backfire if one group feels excluded from profits, decision-making, or future value growth.

Unclear or uneven rights between share classes can lead to misaligned expectations and conflict, especially if dividend policies, exit terms, or voting rights were not agreed upfront.

• Dilution and Control Issues

Issuing new classes of shares or allocating them incorrectly can dilute existing shareholders’ control or ownership stake, especially if voting rights are not clearly defined.

1. Founders may unintentionally lose control of the company
2. Shareholders may feel blindsided by future capital raises or profit allocations

• Administrative Burden

Managing a company with multiple share classes comes with ongoing compliance and admin work, including:

1. Keeping track of share allocations
2. Recording dividend payments by share class
3. Filing correct forms

However, failing to maintain proper records can lead to:

1. Errors in annual returns
2. Penalties from Companies House or HMRC
3. Disputes during audits, sales, or shareholder exits

Case Study:

Joint Venture Development SPV

Two partners plan to buy and convert a commercial property into residential flats. Partner A brings capital, while Partner B manages planning and construction.

SPV structures:

• A shares: Held by Partner B (voting control+ share of points)
• B shares: Held by Partner A (non-voting, fixed return + profit share)
• Article of Association allow tailored dividends
• Shareholders’ agreement sets exit terms and profit distribution.

This structure allows clear boundaries, profit control and investor confidence.

Family Property Portfolio

A married couple wishes to hold their buy-to-let properties in an SPV, minimising tax and planning for inheritance.

SPV structures:

• A shares: Held by Spouse 1 (higher earner, voting rights)
• B shares: Held by Spouse 2 (basic rate taxpayer, eligible for dividends)
• C shares: Future allocation to children with no current rights

They use dividend flexibility to reduce their joint tax bill and plan long-term wealth transfer.

Practical Tips for using Multiple Share Classes in a Property SPV

Setting up multiple shares classes correctly is about more than just technical compliance. It is also about designing a structure that serves your investment goals, minimises tax and avoids future conflicts. The following practical tips will help you to ensure that your structure works in the real world and not just on paper:

• Start with a clear objective

Before creating multiple share classes, you need to understand: Why do you need them?

1. To split income with a spouse or child?
2. To give fixed returns to investors?
3. To retain control while sharing profits?
4. To plan for inheritance and succession?

• Keep it as simple as possible

Just because you can create many share classes does not mean you should. Complexity increases cost and risk.

1. Use just A and B shares in most cases
2. Add C or D shares only if you truly need different rights
3. Avoid over-engineering the structure at the outset

• Draft bespoke articles and shareholders’ agreement

Generic or off-the shelf Articles don’t usually handle alphabet shares properly. You can get these documents professionally prepared and ensure that they include:

1. Precise dividend rights for class
2. Voting rights
3. Rights on winding up or sale
4. Pre-emption rights
5. Exit or buyback terms

Comparison Table: Common Differences Between Share Classes in a Property SPV

Feature/ Right	Class A shares	Class B shares	Class C shares
Voting Rights	Full voting rights (e.g. 1 vote per share)	Typically, no voting rights	May have limited or no voting rights
Dividend Rights	Eligible for discretionary dividends	Eligible for dividends	May receive fixed dividends or none
Capital Rights	Full rights to capital on winding up	Often equal rights or restricted rights	Often restricted or set % entitlement (unless stated in Articles)
Transfer Restrictions	Subject to shareholder agreement	Maybe restricted or freely transferable	Often restricted (e.g. cannot transfer to outsiders)
Intended use	Founders/active directors	Spouse/children/passive family members	Investors, trusts or future planning shares
Dividend Eligibility	Yes, usually paid first (at discretion)	Yes, typically if declared for that class	Only if defined by Articles/board decision
Control Influence	High-usually controls board decisions	Low- typically no influence	None or limited (unless stated in Articles)
Used for	Day-to-day control and management	Income splitting, family tax planning	Inheritance planning or external investors
HMRC risk level	Low (if commercial use)	Medium (settlements legislation may apply)	High (if used artificially or without valuation)
Tax planning potential	Medium- full exposure to tax	High-if structured properly	High-especially for growth/estate planning.

Conclusion

Using multiple share classes in a property SPV is not just a technical accounting exercise. It is also a strategic tool that can offer real advantages in terms of control, flexibility, tax efficiency, succession planning and investor relations.

However, the flexibility comes with a need for caution, clarity and compliance. The legal structure must be compliant; the tax implications must be well understood and the reasoning behind each share class must be carefully thought through. Whether you are splitting shares with a spouse, gifting to children, or bringing in outside capital, everything must be properly documented, commercially justifiable and fully compliant with HMRC and Companies House requirements.

If you are serious about building a scalable, tax-efficient property business, multiple share classes can be one of your most powerful tools. But like any tool, it must be used correctly. With the right planning and guidance, you can unlock benefits that protect your assets, support your family, and fuel the long-term success of your SPV.

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Key takeaways:

• Share classes enable flexible ownership and profit distribution: Using multiple share classes allows you to tailor rights such as voting power, dividend access and capital entitlement.
• They offer powerful tax planning opportunities: Alphabet shares can help reduce tax liabilities through income splitting or gifting shares.
• They can support succession, investment and control: Whether you want to retain control while passing value to children or structure an investor’s return without giving away voting rights, share classes are a flexible solution.
• Legal and Administrative Precision is Non-negotiable: To set up multiple share classes correctly, you must update your Articles of Association and keep Companies House records accurate and up to date.
• Poor structuring can create risk, disputes or financing issues: Without clear documentation and planning, multiple share classes can cause shareholder conflict, so simplicity, clarity and legal alignment are key.

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FAQs

1. What is a share class?

A share class is a category of shares that carries specific rights and restrictions. In a property SPV, share classes (like A, B, C shares) can differ in voting rights, dividend entitlement, and ownership structure — allowing you to customise how profits and control are distributed.

2. Why would I want to use multiple share classes in my property SPV?

Multiple share classes allow for:

• Selective dividend payments (e.g. income to a spouse but not the main earner)
• Retaining control while bringing in investors
• Succession planning (e.g. gifting growth shares to children)

3. Is this suitable for a single-property SPV?

It depends. If you’re the only shareholder, multiple share classes may be unnecessary. But if you plan to bring in partners, split income, or future-proof for family planning, then setting up share classes early can make your SPV more flexible.

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