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Property Purchase Frequently Asked Questions

In the first of our series of frequently asked questions we look into the issues your clients will be facing surrounding the use of a Taylor Patterson SIPP & SSAS pension product to purchase property.

Can my client invest directly in UK residential property?

This question is often raised, and generally speaking the answer is no, if they invest directly in a residential property in the UK this can trigger penal tax charges. Exemptions do exist surrounding a property which will have a mixed use but the exemptions are subject to strict criteria.

Can they invest in a UK residential property fund?

Providing it can be demonstrated that the fund is a Genuine Diverse Commercial Vehicle as defined by HMRC, this might be possible, but Taylor Patterson Trustees Ltd considers each fund on its own merits and the member trustee(s) may need to seek specialist investment and tax advice.

Can my client transfer UK commercial property which they already own into the pension fund?

This can be done, but the property must be sold to the pension fund at a market value.  In some cases, it might be possible to transfer the property to the pension fund at market value and treat the transfer of value as a tax relievable pension contribution.

How much could it cost my client to buy a commercial property through the pension fund?

Each case will vary depending on the nature, location and value of the property. Costs your client will need to take into account include legal costs, valuation costs, advice costs, insurance costs, pension provider administration costs and where applicable: lender’s costs and VAT.

Can the pension fund lease commercial property to my client’s trading business?

The commercial property can be leased to the trading business, providing the business pays a market rent for the property and a commercial lease is put in place by an appointed legal adviser. The market rent will be provided by a professional surveyor appointed by the pension fund trustee. They will provide an open market rental opinion on the property in question along with guidance on lease terms. Subject to Taylor Patterson’s agreement, the member trustee(s) may appoint their own preferred valuer.

Can individuals club together with other property investors to purchase UK commercial property with the pension fund?

Commercial property can be purchased with other property investors; however there are certain restrictions and several ways to deal with this. For example Taylor Patterson has a very competitive Group SIPP product where investors become members of the same pension fund and pool funds to purchase the proposed property. This may give access to an asset class that would otherwise not be cost effective individually, since the costs of purchasing and running the property within a pension scheme is divided between the members.

For further details read Our guide to commercial property investment or contact Jeremy Hunt, SIPP & SSAS Property Manager on 01772 550781 or Jeremy.Hunt@taypat.co.uk.

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