Putting existing premises in a SIPP

Edinburgh_Doc

I have a share of a commercial property, from which I work. It's mortgaged, due to be paid off in 12 years. I understand if I put it in a SIPP, I can escape CGT by making an "in specie" payment, as part of this year's pension contribution allowance. What about stamp duty though? Does anyone know if this is payable by the SIPP trustees (i.e. me!)? And what if I leave the premises before retirement, can I only access from the SIPP on retirement?
Lots of questions about a complicated product, I know, but I'm hoping someone can help.

NeilW

Edinburgh_Doc wrote:

I have a share of a commercial property, from which I work. It's mortgaged, due to be paid off in 12 years. I understand if I put it in a SIPP, I can escape CGT by making an "in specie" payment, as part of this year's pension contribution allowance. What about stamp duty though? Does anyone know if this is payable by the SIPP trustees (i.e. me!)? And what if I leave the premises before retirement, can I only access from the SIPP on retirement?

There is a lot of nonsense floating around about what you can do with SIPPs at the moment, so be careful and take good quality professional advice from several sources before deciding to do anything.

I am presuming that you are a partner in a firm and that the partnership owns the property, and that the partnership is a simple partnership and not a limited liability one. If you are an employee or anything else then what I say may not apply.

The first thing to bear in mind is you cannot escape CGT by making an in specie contribution to a SIPP in such a situation. The best you can do is reduce the tax on your income to offset any CGT payment due.

If you transfer the property you create a chargeable event. CGT will be due, and the SIPP will have to pay stamp duty.

Bear in mind that commercial property used for a business comes with some important reliefs attached already. If you work in a firm using it, then the property benefits from Business Asset Taper Relief, which reduces any gain on the property by 75%, and then you have the personal allowance of £8,500 to go at before anything is payable. Plus you have gift relief allowing you to pass it onto somebody else without creating a CGT liability (so called CGT 'hold-over'). And of course the asset may very well be exempt from inheritance tax.

Finally as far as SIPPs are concerned, you are never a trustee of the SIPP. Remember it is just a personal pension where you can direct the trustees to invest according to your instructions.

HTH

NeilW

EdInvestor

Re the mortgage, note that the rules will change next year.At the moment the SIPP can borrow 75% of the value of the (commercial) property.After April, the SIPP will be able only to borrow 50% of its own value. The value of the commercial or residential property is irrelevant.

This may mean you will need to get your property into the SIPP before the rules change.

oceanblue_3

[This may mean you will need to get your property into the SIPP before the rules change.]............except that you are not allowed to because you are a "connected person" since you already own, or part-own, the property.

If you wait until next April, the "connected person" rule will disappear, and you WILL be able to transfer the property to a SIPP (if your partners agree). However, the maximum permitted borrowing will be 50%, not 75%.

Edinburgh Doc, as you will appreciate, this is not an issue where reliance upon the opinions offered by MSE amateurs is recommended. I suggest you follow the advice offered already - seek professional assistance.

EdInvestor

Hello oceanblue,

Next time you want to quote something that another poster says, there's a really easy way to do it which will save you all the bother of typing it out.

See the little blue box in the bottom right hand corner of each post with "Quote" written in it in white letters?

Just click on that, and the post you are replying to will appear before you.You can then edit the post, so as to display the sentence you want to highlight.

HTH

oceanblue_3

Edinvestor, thanks for your advice. However, I don't re-type what posters say; I simply cut and paste. Another misconception of yours............?

I am convinced that you are a politician or a journalist: whenever your knowledge is proved to be inadequate, you change the subject and take a personal swipe.

You may be undisputed queen of your own website, but you must accept the more lowly role conferred here at MSE: we are here to help, not to posture. If you can't help, shut up!

EdInvestor

oceanblue wrote:

Edinvestor, thanks for your advice.

You're welcome