Investment Life & Pensions SIPPS Supplement June 2014 | Page 15

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08/05/2014

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SIPPs and
Commercial
Property

Top property tips
Jeff Steedman offers five top tips for clients when
purchasing commercial property via a SIPP
Top Tip - Engage with your SIPP provider
at the earliest possible stage
Every property is different and each SIPP
provider can have different processes to
follow for property investment. Therefore,
obtain information about the client’s property
and speak to an experienced SIPP provider.
Try to obtain the following information:
a) Estimated value of property
b) Copy of a valuation report, survey and/or
property schedule
c) Understand how this property purchase
will be financed - transfers, contributions,
borrowing
d) Find out if the property is “subject to VAT”.
Send this information to your SIPP provider
who can then outline their requirements.
Tip 2 - Explore all financing options
There are many ways to finance the purchase
of a property and advisers should consider:
transfers-in, new contributions from either the
company or member, creating a joint SIPP to
allow pooling of funds (spouses, other
relatives, other directors) or borrowing from a
bank. If there are still insufficient funds the
members could consider “part purchase” of
the property, but engage with your SIPP
provider to discuss the challenges this may
bring.
Tip 3 - No residential property, but there
are some exceptions
Generally residential property won’t be
allowed into a SIPP However, there are some
.
types of property that might touch the edges
of ‘residential’, that may be allowed e.g.
nursing homes, care homes, children’s
homes, hotels, student accommodation and
even hospitals and prisons.
(Also read this section of the HMRC manual:
www.hmrc.gov.uk/manuals/rpsmmanual/RPS
M07109050.htm)
Tip 4 - Connected party transactions
Clients and advisers need to fully understand
the “connected party” rules. In brief, ANY
transaction between the SIPP and the
property/members/connected persons MUST
be carried out “on commercial terms”.
Connected party transactions can take place
at these stages: property purchase, transfer in of property, contribution “in specie” of
property, leasing property, refurbishment of
property and sale.

SIPPs

So, once again, engage with your SIPP
provider to ensure the rules are adhered to.
Tip 5 - Be aware of taxes, fees, solicitor
and surveyor charges and other property
related costs
The purchase of a property via a SIPP is like
any other property investment - there are
taxes and charges and the SIPP member
needs to be aware of all the potential costs.
Taxes include: VAT on purchase price