Commercial Property Purchase through Pensions

Should you, your partnership or company need or wish to purchase freehold commercial property, it is possible to use funds from a Self Invested Personal Pension.  A SIPP can even borrow money with a commercial mortgage to enable it buy a property worth more that the SIPP value.  The maximum allowable borrowings within a SIPP are 50% of the total SIPP fund value.  So, for example, if you have SIPP assets valued at £300,000, the SIPP could borrow up to £150,000, making a commercial property purchase of up to £450,000 feasible.  There would, of course, be charges and taxes to take into consideration as part of any purchase.

In this instance, the property is then owned by the pension fund.  If the property then grows in value, this growth is free of income or capital gains tax.  Furthermore, any rent payable on the property (by you, the company or partnership) to the pension fund can be offset against taxation.

The return on your investment is the rent into the pension scheme and any growth in property value less charges.

As the property is held in a pension, there is no need to pay any tax on rental income, capital gains or any profit generated by a sale.  Any income that you draw from your pension whilst retired is taxed.

Several SIPP’s can join together to jointly own a property.

A SIPP can also jointly own a property with others, being individuals and/or companies.

We are receiving more and more enquiries about this complex area of financial planning, so please contact us to discuss your plans.