Frequently Asked Questions

    About British Pearl

    What is British Pearl?

    British Pearl ® operates a property investment platform facilitating share and loan-based investment in UK property. Our site is helping to revolutionise the way people invest in property by enabling investment in buy to let and development projects for as little as £100, as either Share Investors (shareholders) or Loan Investors (lenders), while also helping developers to raise equity and debt funding.

    What does British Pearl do to maximise customer protection?

    British Pearl Limited is authorised and regulated by the Financial Conduct Authority. Our FCA Firm Reference Number is 674693 and you can view our registration on the FCA’s financial Services Register. British Pearl is managed by an experienced team of professionals who are committed to delivering healthy returns. The FCA is the UK financial services regulator; which has three main operational objectives:

    1. securing an appropriate degree of protection for consumers;
    2. protecting and enhancing the integrity of the UK financial system; and
    3. promoting effective competition in the interests of consumers in the markets

    Accordingly, we are subject to strict rules and regulations to ensure these objectives are met. As well as operating within a controlled framework, we also hold ourselves to a very high standard and treat our customers fairly; this can be seen in our Code of Conduct found in the footer of this website. In particular, we do our utmost to ensure we are transparent about our fees and the risks of investing in property. All British Pearl approved property investments are thoroughly vetted by our Investment and Risk Team, who provide full details on every investment opportunity presented on our website. Also, our fee structure has been designed to ensure that our interests are aligned with yours i.e. we make money when you do.

    Our accounting practices are audited by chartered accountants, and our compliance practices are reviewed by independent compliance consultants.

    These steps have all been taken to give investors the confidence, security and trust they need to invest through our site.

    What is our mission?

    Our mission is to be the market place for real estate investment and development capital by:

    1. increasing access to property investment for small savers and other investors in both buy to let and development opportunities;

    2. improving access to capital for developers; and,

    3. creating a legitimate investment class in property shares and loan units which will be tradable in a liquid Resale Market.

    What would happen if the Property Investment Platform ceased trading?

    We have designed a system to ensure that your investments are protected and would continue to be administered in the event that our service ceases to operate.

    Each property investment is owned by a special purpose vehicle (“SPV”), which is a UK limited company incorporated for the “special purpose” of purchasing a single property. Each property is owned by a different SPV and Share Investors become beneficial shareholders of that SPV when they choose to invest in a selected property. This means that your investments are ring fenced from the rest of the business and would remain so if the business were to go into liquidation.

    An additional layer of protection is provided by the structure of British Pearl Group. The estate management, nominee and trustee functions have all been kept separate by incorporating distinct legal entities for each function, out of reach of any potential creditors of British Pearl’s Property Investment Platform.

    How can you invest?

    Follow the simple and quick registration process and you can start investing immediately. The registration process requires you to provide some basic personal details that we will verify with our partner credit reference agency.

    We do this to verify your identity, to comply with UK Anti-Money Laundering rules and to ensure we comply with the FCA rules. We have a strict Privacy Policy to ensure your data is stored securely and is never shared.  We are registered with the Information Commissioner’s Office, and our registration number is Z211396X.

    The Service

    How does the Property Investment Platform work?

    The British Pearl Property Investment Platform, enables multiples investors to collectively invest in a property as either Share Investors (shareholders) or Loan Investors (Lenders). The British Pearl platform is not to be confused with Crowdfunding sites which are often associated with collective funding of charitable projects or early start businesses, or Peer to Peer (P2P) sites which often enable lending to businesses or individuals. The British Pearl Property Investment Platform enables people to invest in property shares, property loans or both. Our Share Investors receive dividends (distributable profits generated from net rental income) and a share of any capital gains, while our Loan Investors receive fixed interest returns.

    How property investment work with British Pearl?

    Property investment through the site is made by purchasing shares in – or making a secured loan to – a UK limited company, known as a special purpose vehicle, incorporated specifically for purchasing that individual property.

    Share Investors purchase shares in a property and Loan Investors provide a loan secured against the property, which will be up to 50% of the property value. This means that at the end of the investment, when the property is sold, Share Investors enjoy a share in the property’s price appreciation after Loan Investors are repaid their original loan amount. During the investment, Share Investors receive dividends (distributable profits generated from net rental income), after Loan Investors are paid their monthly interest.

    Special Purpose Vehicle (SPV)

    It is not possible for more than four people to be registered property owners at the Land Registry. Accordingly, each property listed on our site is owned by an SPV, which is a UK limited company that you can buy shares in. There is a separate SPV for each property; so you know that you are investing in the specific property chosen by you.

    Nominee Arrangement

    As a Share Investor, your shares in the SPV are held under a nominee arrangement, with the nominee being the sole legal owner of the shares. The nominee holds those shares on behalf of you and your fellow investors, and you will be entitled to all the economic benefits as the beneficial owner. The nominee is another UK limited company within the British Pearl group of companies. The purpose of this arrangement is administrative: to facilitate the electronic transfer of shares and for operational ease. It is a widely used mechanism for collective ownership.

    Trustee Arrangement

    As a Loan Investor, your part of the loan to the SPV is held under a trustee arrangement, to mirror the administrative function of the nominee arrangement for Share Investors. The trustee holds all of the loan units on trust for you for operational ease. It is the trustee who is registered as the property’s mortgage holder at the Land Registry.

    Property Purchase Costs

    As with buying property as an individual, there are standard costs associated with the purchase such as stamp duty, solicitor’s fees and survey costs. These initial costs are funded by the Share Investors and are indicated clearly in the Information Pack before you make an investment.

    Standard Investment Documents

    At the point of investment you will be required to complete a set of investment documents. These are in standard form for each investment and sample documents can be viewed in your dashboard.

    How do we select investment properties?

    Selecting a suitable property investment takes time, experience and reliable relationships with property sellers.

    Our Property Origination Team utilises its valuable relationships to ensure that we find property investments that meet our strict investment criteria. Our sources include: private landlords, estate agents, auction houses, insolvency practitioners, developers and funds.

    The Investment and Risk Team applies a comprehensive vetting process to ensure that we select the most appropriate property investment opportunities to present to our investors. These include identifying properties in areas of strong rental demand and/or high capital growth potential. We also work very hard to purchase properties below market value although this is not always possible. This means seeking to purchase properties at a discount to the (industry standard) valuation conducted by an independent RICS chartered surveyor. We source properties all over the country in order to provide our investors with a variety of choices so that they can diversify their investment portfolios.

    Our approach to property investment aims to achieve capital gains in an upward market, and a capital buffer in a challenging property market.  

    Do you choose the properties that you invest in?

    Yes. We provide a wide selection of properties from across the country, with varying rental yields and capital growth forecasts, so that you can build a diverse property portfolio. Together with utilising our detailed Information Pack, we recommend that you conduct thorough research before investing your money.

    What are the different types of investment?

    Our focus is on providing you with a selection of residential property investments from across the country.

    Investment Categories

    We offer our investors three categories of residential property investment.

    1. Tenant Ready

    A buy to let (BTL) investment, mostly new build houses or flats ready for immediate occupation, with a minimum five year investment term.

    2. Refurbishment

    A buy to let (BTL) investment, where refurbishment will add value to the investment, with a minimum five year investment term.

    3. Development (Short Term)

    We partner with developers and create value through planning permission. Investment duration will range between 6 and 24 months.

    New Sale Market vs Resale Market

    Property investments can be made through our New Sale Market and Resale Market within the site. The New Sale Market is where investors can purchase shares or loan units in properties new to the site and the Resale Market is where investors can purchase shares or loans units in properties that have already been fully funded through the New Sale Market.

    New Sales are presented on the site with:

    (i) a valuation and a survey from a chartered surveyor;

    (ii) a conveyancing report; and,

    (iii) forecast rental information.

    Resales are listed along with:

    (i) an updated valuation (based on indexing the purchase price against the House Price Index for the appropriate borough or region that is published, each month, by the Land Registry);

    (ii) a RICS desktop valuation (carried out quarterly); and,

    (iii) if available, a comprehensive valuation undertaken by a chartered surveyor after an inspection (carried out every five years).

    Can you invest in multiple properties at the same time?

    Yes. You can invest by acquiring shares or lending in respect of different properties across all available categories and locations.

    Who can invest?

    Eligible investors include individuals, trusts, corporations and overseas investors.

    FCA Rules and other applicable laws and regulations require British Pearl to verify the identity of, and run anti-money laundering checks against, all of our investors.

    Our investors will be asked to agree to the checks with external agencies, including credit reference and fraud agencies, and they may have to provide original identification documents. Customers will not be able to transfer money into their investor account, or make investments, until all checks are completed.

    Additionally, the FCA requires us to categorise our Share Investors as either a Certified High Net Worth Investor, Self-certified Sophisticated Investor or Certified Sophisticated Investors. These three categories are collectively known as “retail investors”. More information is available on retail investor categorisation within the investor registration process.

    Overseas investors are responsible for satisfying themselves that investing in UK property through British Pearl is legal in their country. This includes complying with any governmental or regulatory requirements and other applicable formalities. For details on how to invest please Contact Us.

    Property Investment

    Where do we source our properties from?

    The Property Origination Team has close relationships with a significant number of property owners and sellers ensuring a large supply of properties of varying styles and locations. Sellers include estate agents, developers, large private landlords, insolvency practitioners and property funds. As a result of these relationships, we can access off market deals at competitive prices. It also means the property completion process is much smoother and quicker.

    Where do we source our tenants from?

    A variety of places: local agents, large property portals such as Zoopla, relocation agents, and relocation departments of large corporates. Our tenant vetting process is focused on identifying responsible tenants with stable incomes who can make the rental payments.

    How are the properties valued?

    The Investment and Risk Team conduct their own desktop valuation in order to assess the viability of an investment opportunity. The team’s valuation process is thorough and takes into account many factors including market comparables.

    Further, once the potential investment has been approved by the Investment and Risk Team, a formal valuation will be undertaken by a Royal Institute of Chartered Surveyors (“RICS”) chartered surveyor. RICS regulates the profession and maintains the highest educational and professional standards, protecting consumers via a strict code of ethics and provides impartial advice and guidance.

    Chartered surveyors are made up of the two highest qualifications within the RICS.  They are educated in the techniques of property valuation and, much like lawyers and accountants, they have professional indemnity insurance against professional negligence or incompetence. This means that, aside from the high standards they are held to (described above), they are also held accountable for, and can be penalised for grossly inaccurate valuations.

    How long is the investment period?

    This depends on the investment type. Our BTL investments are for a minimum period of five years. Our development investments are between 6 and 24 months. The Investment and Risk Team will determine the duration of an investment and that will be clearly indicated in the Information Pack, which is found on the investment listing. There is scope for the duration to be extended by us if it would be detrimental to sell at the intended investment exit date. We are also developing a Resale Market within the site . The goal of the Resale Market is to provide our investors with the ability to sell their shares and loans units to other investors before the investment exit date. Please note that the Resale Market is not yet available and when it is we will not be able to guarantee liquidity. Accordingly, you should invest only if you are happy to commit funds for the full investment term.

    Who pays for the refurbishment or development?

    If an investment involves refurbishment or development, these costs form part of the overall project costs in the same way stamp duty and legal fees do. All project costs, known and anticipated, are clearly indicated in the Information Pack. The approach we take is to provide conservative (high) project costs with the view to making savings where possible. Trusted contractors undertake projects to a high standard and with reliable delivery times.  The project costs are borne by the Share Investors as collective owners of the property, and not Loan Investors, who lend money to the property owning company.

    Who takes care of the letting and management?

    We do. We ensure that the property is let and maintained to a high standard.

    The SPV, which purchases the investment property, enters into a management agreement delegating the property management decision-making to British Pearl.

    We charge 12.5% plus VAT per annum of gross rental income, which includes advertising and managing the property but excludes maintenance.

    Please note that British Pearl Estates (our estate management company) and its activities fall outside the scope of the regulation of the Financial Conduct Authority. 

    What happens if the tenant damages the property?

    We administer the property management services including dealing with property damage. After establishing the cause and extent of the damage a number of things may happen; the tenant may pay to fix the damage, it may be covered by insurance, or the tenant’s security deposit may be used. Otherwise the damage will be fixed from money held in the SPV Reserve, a contingency fund specific to each investment. Where the SPV Reserve does not have sufficient funds, British Pearl can either direct funds from a separate contingency fund called SHIELD, or we will arrange for a loan to the SPV secured against future rental income.

    We will never ask investors to provide further capital.

    What if there is no tenant?

    Plainly this would not be desirable. We select our properties in areas of high rental demand to protect against this risk and we use all of our relationships to ensure the properties are tenanted with minimal void periods. We also ensure the SPV Reserve can cover a 3 month void period so that all liabilities are met (such as any service charge, ground rent or interest payments). Despite this approach, there remains a risk of a property being vacant for an extended period. That may affect both Share Investors and Loan Investors. Share Investors may not receive dividends and Loan Investors may not receive interest payments, and this position will only be sustainable for a limited period before we would have to sell the property investment. In this scenario, a sale may mean Share Investors incur some losses while our conservative loan to value criteria should mean that Loan Investors would be more likely, although not certain, to recoup their investment. While this is an unlikely event, it is necessary to be disclosed and explained.

    How will we keep you updated?

    One of the benefits of using our site is that you can track the progress of your investment through your dashboard. Your account includes features such as rental performance tracking, property price progress and information on other significant events. We are also working on some dynamic features which will optimise your experience and make following the progress of your investment much more enjoyable.

    What if it is the wrong time to sell?

    Our goal is provide both our Share Investors and Loan Investors superior risk adjusted returns and predictable cash flows. However, it may be that when approaching the end of an investment term the property market is stagnant, as often happens around a general election, or depressed as it was during the global credit crisis in 2008. In order to ensure returns are maximised – or losses minimised – the Investment and Risk Team may determine that it is in the best interests of Share Investors to (i) delay the sale until the market recovers or (ii) bring forward a sale to avoid a lower property price in a depressed market.

    In the first scenario, in line with the contractual terms, Loan Investors will receive their original loan amount back at the end of the investment term, along with any outstanding interest. This is unless Loan Investors would like to stay in the investment for the extended duration, or exit is simply not possible. This could happen where the property and finance markets are depressed to the point where neither a sale nor refinancing is possible at that point in time. In this scenario interest payments will continue to be due to Loan Investors (paid if tenanted or accruing* if vacant) until the property is eventually sold.

    In the second scenario, Loan Investors will have their capital repaid earlier than originally intended and will not receive the interest payments that would have accrued for the remainder of the investment term, however, they will of course be able to reinvest their capital through the site in other investments.

    In both scenarios, the remainder of the sale proceeds will be used to pay the Share Investors.

    * Interest payments are obligations, and if not paid immediately are accrued and will be paid as soon as the funds become available.

    Investor Returns

    What types of returns are available to investors?

    Share Investors receive returns in the form of dividends and capital gains, while Loan Investors receive fixed interest.

    Share Investors receive quarterly dividends from “net” rental income, which means that costs are deducted before the investor’s share of the rent is paid to them. Costs include:

    • interest payments to Loan Investors (in the same way as one might make mortgage payments to a bank);
    • management and maintenance fees paid to the estates management company;
    • an SPV Reserve, in case of unexpected expenses (NB these deductions are reviewed periodically and, if we have been too conservative, surplus funds will be reimbursed as part of the dividends); and,
    • Corporation Tax payable by the SPV.

    To be prudent, dividends are paid quarterly, so that we are certain that the rental income will first cover all property costs. Upon exit, Share Investors will enjoy a share in any property price appreciation proportionate to their ownership percentage. It is important to note that property prices can go down as well as up and past performance is not a reliable guide to future performance.

    Each property’s Information Pack contains an estimated annual dividend based on guidance provided by local estate agents and surveyors, together with estimated void periods and ongoing maintenance costs, as well as any other anticipated costs. It is important to note that gross rents may be lower, and costs higher, than anticipated.

    Loan Investors receive fixed monthly interest returns, net of 20% income tax, in line with market mortgage interest rates at the time of investing. They are not entitled to a share of the property price when exiting the investment.

    You should note that this information is based on estimates and British Pearl does not provide investment advice. Please refer to the Key Risks section of the site.

    How do you know whether to be a Share Investor or a Loan Investor?

    Property investment involves risk, and we ask all investors to review the Key Risks section of our site and to seek independent financial advice, especially where further clarification on the risks of investing is required.

    Share Investors

    • Face higher risks than Loan Investors but also potentially benefit from higher rewards.
    • The total return to a Share Investor is affected by:
      • unpredictable property prices: Share Investors take the first loss if property prices decline, but also enjoy leveraged upside if property prices rise (see FAQ below entitled “Why enable loan-based investment?”)
      • dividends (net rental income) that are not guaranteed: The property may not generate any rental income.

    Loan Investors

    • In the same way that a mortgage provider secures its loan against a property, Loan Investors’ loans are secured against the investment property, and they are entitled to receive a monthly fixed interest return, the level of which is known at the time of investing.
    • Loan Investors do not participate in any potential property price appreciation.
    • Loan Investors will only receive their original loan amount back if the property can be sold, or refinanced by other Loan Investors or Share Investors, and if the property price does not decrease by more than 50% (assuming 50% Loan To Value). If that were to happen, their original loan amount would be at risk.
    • For example, if a property is bought for £100,000, made up of £50,000 from Share Investors and £50,000 from Loan Investors, the Loan Investors’ original loan amount is only at risk if the property cannot be sold for £50,000.

    Some investors may feel it would be prudent to diversify their investment by investing in both shares and loans. This means you can achieve predictable fixed returns as a Loan Investor, as well as participate in the potential property price appreciation as a Share Investor.

    Only you can judge whether Share Investor returns or Loan Investor returns suit your circumstances. If you are unsure please seek independent financial advice.

    Why offer loan-based investment?

    Unlike other property investment sites we facilitate lending. This has a number of benefits; it means we can provide our investors with more choices (fixed or variable returns) as well as providing our Share Investors with the advantages of controlled leverage.

    What is controlled leverage? By having loans to our SPVs we can provide our Share Investors with higher capital returns. This can be a difficult concept so here is a helpful example.

    If a property costs £100,000 and in five years’ time it doubles in value to £200,000. If the property was purchased with 100% share investment then Share Investors would double their money. However, if the property were funded with 50% loans, Share Investors would receive three times their investment on exit. This is how it works:

    • Share Investors spend £50,000 to collectively own the SPV, while Loan Investors lend the SPV £50,000, secured against the property.
    • In five years, when Share Investors come to sell the property for £200,000, £50,000 of the sale proceeds repays the Loan Investors, while Share Investors get to keep £150,000 for themselves.
    • So, Share Investors have turned their £50,000 investment into £150,000, because they were able to borrow, enabling them to make three times their original investment.

    Compare this to the first scenario where Share Investors had to invest twice as much (£100,000) only to receive two thirds of the returns. So borrowing, or leverage, enables Share Investors to enhance their returns. While this sounds very attractive, there is a cost to the borrowing in the form of interest payments. These are paid by the SPV to the Loan Investors before Share Investors receive the remainder of the rental income (in the form of dividends).

    Our Investment and Risk Team balances the use of leverage with a conservative investment strategy. Our SPVs will not have more than 50% loan to value (“LTV”). This means that the property will be purchased with up to 50% loan capital (and the remainder as share capital). As explained above, that means the property would have to depreciate more than 50% in order for Loan Investor capital to be at risk. At 50% LTV, Share Investors can enjoy leveraged returns when property prices appreciate while not spending excessive amounts on interest payments.

    How and when are returns received?

    Share Investors receive quarterly dividends (distributable profits generated from net rental income) into their investor account, which they can withdraw or reinvest at any time (£100 is the minimum investment amount). To be prudent, dividends are paid quarterly, as it would not be sensible to pay out until we are certain that the rental income will first cover all property costs, some of which may be irregular in their timing e.g. boiler repairs. To be clear, this does not mean you will receive lower dividend payments and, in addition, Share Investors may also benefit from capital gains as part of their total return. Any capital gains (or losses) are crystallised on exit i.e. when the investment is sold (including through British Pearl’s Resale Market, which is in development).

    Loan Investors receive interest on a monthly basis, net of 20% income tax, direct into their investor account, which they can withdraw or reinvest at any time (£100 is the minimum investment). A Loan Investor’s original loan amount will also be repaid into the investor account after they exit the investment.

    Will investors be required to provide further capital?

    No. From the very outset the Investment and Risk Team calculates the amount of capital required for each property investment from both Share Investors and Loan Investors. The capital requirements are clearly stated in the Information Pack. 

    Aside from the standard property transaction costs including stamp duty, legal and surveyors’ fees, and any refurbishment costs, we also make a provision called the SPV Reserve that caters for rental void periods and other unexpected costs like flood damage. Although many unexpected costs are covered by insurance, insurers usually take time to pay out so we ensure that the SPV Reserve has sufficient funds to meet all costs in the interim. It is also intended to cover unexpected costs not covered by insurance. 

    It is possible for a series of events to affect the SPV’s cash flow. For example, an extended rental void period coupled with flood and/or fire damage, all occurring within the same month. In this scenario, when an SPV has a temporary cash flow problem beyond what the SPV Reserve can solve, management will consider providing the SPV with SHIELD capital. SHIELD is a contingency fund that we have the discretion to make available to any SPV (property investment) in the property portfolio to deal with exactly this type of cash flow situation. As soon as the SPV is in a positon to repay SHIELD capital it must do so. SHIELD is funded by British Pearl and is not something we ask our investors to contribute to.

    How do you exit your investment?

    Any capital gains crystallise when you exit your investment. There are two ways to exit an investment:

    1. sell your shares or loan units via our Resale Market; or,
    2. sell your shares or loan units at the investment exit date.

    The Resale Market

    Share Investors can sell shares and Loan Investors can sell loan units through the Resale Market of our site. This is currently in development, we aim to have it available during 2016. When the Resale Market is available it may be that there are insufficient buyers for you to exit your investment. So, until the Resale Market is available and sufficiently liquid, you must not expect to be able to exit your investment before the investment exit date. Details on exactly how this service will operate will be published as soon as possible.

    In the interim, investors should only invest through the site if they are happy to exit at the investment exit date.

    The Investment Exit Date

    Every property investment is presented on the site together with an Information Pack, which contains all of the pertinent details of the investment. Currently, there are three categories of property investment, all of which are residential. Our two buy-to-let categories have an investment term of five years, while our third category, development opportunities, has a maximum investment term of two years. The Information Pack always clearly indicates the investment term. It is critical that you are aware of the investment term, and understand that your money could be tied up for the full duration without the ability to exit earlier. Further, there is scope for the duration to be extended by us if it would be detrimental to sell at the time. In short, if you cannot afford to be without your funds for the full investment term, you should not invest.

    Two months before the investment reaches the exit date, it is offered to our investor community on the site’s Resale Market. If the investment is not fully taken up by the investment exit date then it is offered on the open market in the same way any other property would e.g. using an estate agent.

    How much money will you make?

    Obviously, as with any investment, predictions about returns cannot be made with certainty. Loan Investor returns are set by the interest rate. Share Investor dividend returns are not guaranteed.

    We provide clear details in the Information Pack to enable you to make an informed investment decision. Information on projected yields and any known expenses will be included, however, it is important to note that these are estimates and projections and there are no guarantees.

    The performance of any investment depends on several factors outside of our control, such as property prices and the state of the economy. Each property investment is unique and should be assessed on its own merits, taking into account all known factors, and considering that the investment could incur unknown costs and be subject to negative market events.

    How and when will you receive money after your investment is sold?

    Your investment can be sold in one of two ways: (i) your shares (Share Investor) or loan units (Loan Investor) can be sold on the site’s Resale Market (in development) or (ii) the property is offered on the open market after it reaches its investment exit date.

    When the sale is complete Loan Investors will receive their original loan amount back, plus any outstanding accrued interest payments, while Share Investors will receive their share of the sale proceeds, plus any outstanding dividends and their share of the funds remaining in the SPV Reserve. Sale proceeds will go straight into your British Pearl investment account from where they can be easily withdrawn or reinvested into other investments on the site.

    If there are sufficient buyers of your shares (Share Investor) or loan units (Loan Investor) on the site’s Resale Market you should be in a position to immediately liquidate your position.  If the property is sold on the open market it could take several months. In that case, Loan Investors will continue to accrue interest payments and Share Investors will continue to receive dividends – while the property is tenanted – up until the sale completes.

    All investors will be updated regularly on the status of their investment during the sale process.

    It is possible that Share Investors could receive less than their original investment, however, we use our selection policy to try reduce that risk by selecting, and vetting investments on the strength of their capacity to produce capital gains above the initial project cost, including transaction and possible refurbishment costs.

    Investor Account Funding

    How do you fund your investor account?

    You can only invest by bank transfer. Our bank’s sort code and account number is on the account funding page in your investor account. IBAN details are available to overseas investors.

    Due to the faster payments system, interbank money transfers originating from other UK bank accounts will most likely clear on the same day, however in some instances where Faster Payments is not the default system, funds could take up to three business days to appear in your account.

    International transfers from our overseas investors will take longer. Please refer to your bank for advice on how long money transfers to the UK may take.

    Please ensure all transfers are made in sterling (GBP).

    What is the minimum investment amount?

    The minimum investment amount is £100.  This cannot be split between share and loan investments for the same property i.e. £50 as a Share Investor and £50 as a Loan Investor. You must invest no less than £100 for either.

    Will you be charged for funding your investor account?

    There is no charge for funding your account if the funds originate from a UK based bank. However, our bank does charge to receive international payments. Charges are clearly detailed on the account funding page in your dashboard.

    Do we charge to withdraw funds from your investor account?

    No. UK customers can easily withdraw funds from their online investor account, 24 hours a day, for free. 

    UK accounts using the Faster Payments system should receive cleared funds on the same day but sometimes funds can take up to three business days to clear. Our bank will charge for international transfers and they will be clearly indicated in your dashboard.

    For security reasons you will only be able to receive your funds into the bank account from which they originated.

    How safe is your money in your investor account?

    Before investing, the funds in your investor account are held on trust in a segregated client account at a leading UK bank. They are separate to British Pearl’s funds and protected by the Financial Services Compensation Scheme (FSCS), up to a limit of £75,000. For more information please visit the FSCS website.

    Do we pay interest on investor funds?
    Interest is not paid on funds in your investor account.
    Can you put your investment in the name of your company?

    Yes, however this is only possible before making an investment. Your account will need to be updated to include your company information. Once all your personal and company details have been verified you are free to transfer funds from your company bank account to your British Pearl investor account.

    Please note that once a decision has been made to invest in the name of your company, all investment documentation will be produced in the name of the company. Accordingly, the company will have the beneficial interest. Please seek advice from your accountant or independent financial advisor before making this decision.

    Fees

    How do we charge investors?

    Fees vary depending on whether you are a Share Investor or Loan Investor.

    There are two main fees for Share Investors.

    1. Participation Fee

    Share Investors are charged a one-off investment participation fee of 2% of funds invested, whether purchasing within the New Sale Market or Resale Market. Sales in the Resale Market are charged at a discounted fee of 0.25%, with a minimum charge of £10. All of these fees contribute to our service administration costs.

    2. Performance Fee

    Performance fees vary according to the category of investment.

    Category 1 – Tenant ready buy to let investments do not incur performance fees.

    Category 2 – Refurbishment buy to let investments incur a 15% performance fee and a 30% outperformance fee.

    Category 3 – Development investments incur a 50% performance fee.

    Performance fees are a percentage of the difference between the sale price (at the point of exiting the investment) and the total (initial) project costs. Total project costs are the purchase price of the property plus all related transaction costs, including any refurbishment and development costs, if applicable.

    An outperformance fee is a higher commission charge where the investment outperforms the average property within its postcode. We assess this by reference to the House Price Index (HPI). If the HPI is 5% per annum and the investment value increases by 10% per annum, then we will have outperformed the market by 5%. The commission charge increases to 30% on the outperformance only.

    Please refer to the “How do the performance fees work?” in the Fees section of the FAQs for numerical examples and a better understanding of performance fees. 

    Loan Investor fees

    There are no Loan Investor participation fees in the New Sale Market. There is a service and administration fee of 0.25% to sell in the Resale Market, with a minimum charge of £5.

    What costs does the SPV incur?

    Each Information Pack specifies the initial and ongoing costs to be incurred when entering into the investment. Initial costs include stamp duty, lawyers’ fees, surveyor’s fees and other costs. Ongoing expenses may include insurance, services charge, and ground rent for apartments.

    In addition to these ongoing costs we also charge a management fee of 12.5% plus VAT of the gross rental income. This covers advertising, lettings and estate agent management fees; our local and trusted partners working hard to ensure the property is tenanted and properly maintained.

    Importantly, we indicate all of the projected returns and fees in the Information Pack, so you are fully aware of the costs and potential returns before making your investment.

    Also, we will not ask you to make further contributions to the investment in the event that unexpected maintenance costs arise. The SPV Reserve and SHIELD fund have been established to prepare for such situations, where the SPV may experience a temporary cash flow problem. Please refer to the FAQ “Will investors be required to provide further capital?”

    Why are the fees to Loan Investors lower?

    Loan Investors are not entitled to a share in the potential gains for Share Investors. Loan Investors provide Share Investors with the ability to enhance their investment as explained in the “Why enable loan-based investment?” FAQ in the Investor Returns section.

    How do the performance fees work?

    Category 1 – Buy To Let

    British Pearl does not charge performance fees for category 1 investments.

    Category 2 – Refurbishment Buy To Let

    If the total project cost of a property investment is £100,000 and in 5 years’ time, at the point of exit, the value of the property increases to £130,000, in line with the area benchmark (HPI), British Pearl would charge a 15% performance fee. In this scenario Share Investors would share £25,500 of capital gains i.e. net of the £4,500 performance fee as follows;

    • 15% of £30,000 (£130,000 – £100,000) = £4,500
    • Total fees                                             = £4,500

    If the property price were to increase to £150,000 – beyond the area benchmark of £130,000 – British Pearl would charge a 30% outperformance fee on the gain above the benchmark. In this scenario Share Investors would share £39,500 of capital gains i.e. net of the £10,500 performance and outperformance fees as follows;    

    • 15% of £30,000 (£130,000 – £100,000) = £4,500 +
    • 30% of £20,000 (£150,000 – £130,000) = £6,000
    • Total fees                                           = £10,500

    Category 3 – Development

    Performance fees in relation to development projects are simply 50% of the difference between the sale price, on exiting the investment, and the project cost.

    For example, a prospective development involves a total project cost of £2m, with an expected sale value of £2.8m. Where the investment is equally split between loans and shares (50% LTV), the total share investment is £1m. Accordingly, when the property is sold and the loan has been repaid, Share Investors would share £400,000 of the total capital gains of £800,000, i.e. net of the £400,000 performance fee.  This represents a substantial return of 40% on the £1m share investment.

     

    Do we charge to fund your investor account?

    No. Our bank may charge overseas investors to receive funds into our company account. Details of the charge can be found in the investor account section or from our customer service team.

    Do we charge to withdraw funds from your investor account?

    No. UK customers can easily withdraw funds from their investor account, 24 hours a day, for free. 

    UK accounts using the Faster Payments system should receive cleared funds on the same day, however, sometimes funds can take up to three business days to clear. Our bank will charge for international transfers and they will be clearly indicated in your investor account.

    For security reasons you will only be able to receive your funds into the bank account from which they originated.

    Developers and Partners

    How do developers raise capital?

     

    Developers can join our service using the quick and simple registration process. Once registered, in your Dashboard, you will be asked to provide information about your company, its directors and your development track record in order to become an approved partner. 

    Once approved, you will be able to submit projects for review by our Investment and Risk Team. We can only accept projects that meet our initial qualification criteria, which are clearly set out on the Project Submission page. 

    The Investment and Risk Team carefully considers all qualifying projects. Unlike some traditional lenders, our team understands the need to move quickly and is therefore focused on reaching a decision as soon as possible. Once the project is approved you will quickly receive the funds you need. 

    How do you become a trusted property seller?

    All types of property sellers are invited to get in touch; estate agents, private landlords, insolvency practitioners, developers, asset managers.

    Please use the Contact Us section of the site.

    Taxes

    What taxes are paid by Share Investors?

    Value Added Tax (VAT); is payable on all fees charged by British Pearl. This includes participation, performance and Resale Market fees.

    Dividend Tax; Share Investors receive dividends gross of tax and are only subject to UK Income Tax if they are individuals (through self-assessment) or trusts, not if they are charities, or corporate investors. Overseas investors, both individuals and corporations, are not liable for UK Dividend Tax and will therefore receive dividends gross of tax, however overseas investors may be liable for taxes in their local jurisdiction and should therefore seek advice from a local tax professional.

    Dividend tax rates are changing as of the 6th April 2016. Under the current system, a 10% tax credit is available against dividends to compensate for Corporation Tax already paid at the SPV level. As a result, basic rate taxpayers pay no tax on their dividend income, while higher rate taxpayers pay an effective rate of 25% and additional rate taxpayers pay 30.56%.

    Under the new rules, as of the 6th April 2016, the first £5,000 of dividend income in each tax year will be tax free. Sums above that will be taxed at 7.5% for basic rate taxpayers, 32% for higher rate taxpayers and 38.1 % for additional rate taxpayers. No tax will be deducted at source and taxpayers must use self-assessment to pay any tax due.

    Consequently a share portfolio would need to be worth more than £125,000 before an individual will incur any tax, this assumes the share portfolio is yielding no more than 4%. Where a share portfolio yields 8% a UK taxpayer will only incur taxes if the share portfolio is worth more than £62,500.

    Stamp Duty Tax (SDT); is applicable to shares purchased on our Resale Market only, it is not applicable to shares purchased on our New Sale Market i.e. newly issued shares. SDT is only payable by the purchaser of the shares when the value of the shares exceed £1,000. Stamp duty is calculated at 0.5% of the value of the shares, with figures rounded up to the nearest £5, for example; a Resale Market transaction of £10,000 will incur a £50 SDT.

    Capital Gains Tax (CGT); UK taxpayers who are individuals are required to pay CGT if they exit their investments for more than they purchased it for through the Resale Market or at the investment exit date. CGT is not applicable to companies or overseas investors.

    UK taxpayers receive an annual tax free allowance on CGT of £11,000 meaning that annual capital gains below £11,000 will not be subject to CGT. Remember, this is the total capital gains across all your investments not just with British Pearl. If you have made more capital gains than this in the tax year, the gains may be taxable at 18% for basic rate taxpayers and 28% for higher or additional rate taxpayers. For example, if you are a basic rate taxpayer and you made a gain of £50,000, the tax would be calculated at the 18% rate against the taxable amount of £39,000 (£50,000 less the 11,000 allowance) for a total of £7,020. This calculation method applies to the other tax bands.

    Your tax treatment depends on your individual circumstances and may be subject to change by HMRC in future. Nothing on our site constitutes tax advice; these tax rates are provided as an indication only and all investors are strongly advised to obtain independent advice.

    What taxes are paid by Loan Investors?

    Valued Added Tax (VAT); is payable on the Resale Market fees.

    Income Tax; Loan Investors, both domestic and overseas persons, receive interest net of 20% Income Tax. UK basic rate taxpayers will have no further tax to pay, however higher and additional rate taxpayers are required to pay additional taxes through self-assessment. Overseas investors may be subject to additional taxes where they reside.

    Corporation Tax; Withholding tax will not be applied to interest income paid to Loan Investors who are UK corporates. Instead, interest income must be accounted for in the company accounts and Corporation Tax may be payable, subject to the company’s overall profitability. UK Corporation Tax rates are currently 20%, however will fall to 19% in 2017 and 18% in 2020. Where the Loan Investor is an overseas corporate, 20% withholding tax will be applicable on interest income unless the corporation is a bank; if this is the case the withholding tax can be reduced by making a claim under the relevant double tax treaty depending on the jurisdiction of residence.

    Your tax treatment depends on your individual circumstances and may be subject to change by HMRC in future. Nothing on our site constitutes tax advice; these tax rates are provided as an indication only and all investors are strongly advised to obtain independent advice. 

    What taxes are incurred by the SPV?

    Stamp Duty Land Tax (SDLT); will apply to the acquisition of the property. SDLT is normally charged at 15% on residential properties costing more than £500,000 bought by companies and collective investment schemes. However, since our SPVs are exempt, SDLT will be based on the prevailing rates for natural persons. The current rates are:

    • 0% SDLT on the first £125,000 of the property price,
    • 2% SDLT on the next £125,000,
    • 5% SDLT on the next £675,000,
    • 10% SDLT on the next £575,000, and
    • 12% SDLT on the rest i.e. above 12% tax on the purchase price above £1.5 million.

    Here is an example of the tax bill on a property purchased for £1 million:

    • (0% x £125,000) = £0
    • (2% x £125,000) = £2,500
    • (5% x £675,000) = £33,750
    • (10% x £75,000) = £7,500
    • Total tax bill = £43,750.

    Corporation Tax; The taxable profit made by the SPV is subject to Corporation Tax, therefore net rental income minus all expenses and fees is subject to 20% Corporation Tax. Dividend payments are made to Share Investors from taxed net rental income and after contributions to the SPV Reserve.

    Should the property price increase, Corporation Tax is payable on the gain when the property is sold. This future Corporation Tax liability is recognized in the valuation of the SPV and is called deferred tax. For example, if the property valuation increased by £10,000, then £2,000 would be provided as a deferred tax liability, which in turn is reflected in the estimated value that we publish for that property’s SPV’s shares on the site. Recognising deferred tax is important for ensuring the investors who have benefited from any house price increase are the same investors that incur the related Corporation Tax.

    Corporate Tax rates are due to be reduced from 20% to 19% in April 2017, and to 18% by April 2020; this will mean there will be more money to distribute through dividends and capital gains.

    VAT; There may also be a VAT cost on refurbishment or development expenses depending on the items concerned. Please note that VAT payments cannot be recouped from the HMRC for residential properties. However, VAT can be recouped on commercial properties where the owner has elected for VAT to apply.

    Your tax treatment depends on your individual circumstances and may be subject to change by HMRC in future. Nothing on our site constitutes tax advice; these tax rates are provided as an indication only and all investors are strongly advised to obtain independent advice.

    Can you receive EIS or SEIS tax relief?
    EIS/SEIS tax reliefs are not available for property investments.

    Security

    Are we authorised and regulated by the Financial Conduct Authority?

    Yes. British Pearl Limited is authorised and regulated by the Financial Conduct Authority. Our FCA Firm Reference Number is 674693 and you can view our registration on the FCA’s financial Services Register.

    British Pearl is managed by an experienced team, committed to the highest standards of professionalism. The FCA is the UK financial services regulator, they have three main operational objectives;

    1. securing an appropriate degree of protection for consumers;
    2. protecting and enhancing the integrity of the UK financial system; and
    3. promoting effective competition in the interests of consumers in the markets.

    We are subject to strict rules and regulations to ensure these three main objectives are met.

    How do we protect your money and investments?

    By using SPVs, each property investment is kept apart from the assets and liabilities of British Pearl, including all other property investments on the site. This means that if British Pearl were to fall into financial distress and cease trading an alternative manager would be appointed to administer your investments in accordance with our agreements.

    Additionally, the funds held in your investor account are held on trust in a segregated client account at a leading UK bank. They are separate to British Pearl’s funds and protected by the Financial Services Compensation Scheme (FSCS), up to a limit of £75,000. For more information please visit the FSCS website.

    How do we protect your data?

    The security and use of your personal information is very important to us, so we are committed to protecting and respecting your privacy. British Pearl’s data protection registration can be confirmed on the Information Commissioners Office Register, using registration Z211396X.

    Our website employs full site encryption secure sockets layer (SSL) technology for added security. SSL certificates meet the highest standard in internet security for website authentication. We will also employ all the appropriate firewalls, antivirus, anti-spy, anti-spam, anti-phishing protections and intrusion detection services necessary to run our business in a safe environment and protect your personal details from external attack. We also have appropriate security measures in place in our physical facilities to protect against the loss, misuse or alteration of information and limit employee access as far as possible.

    Please refer to the Privacy Policy for further information.

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