buying commercial property with a SIPP

jambobwana_2

My son graduates soon as a dentist and may decide to set up his own dental practice in a few years time. I may wish to help him financially with this venture should he decide to do so. I am retired with a good index linked occupational pension and have other cash savings. I also have a SIPP pension (funded entirely through higher tax relief contributions) and went into drawdown just before the recent changes. Having taken the full 25% cash allowance, the fund has a current value of £150k approx.

I have read a few case studies on how it can be particularly attractive for people in business to use a SIPP to buy their own business premises. I was therefore wondering if it might be possible for my son’s dental practice to be set up as a limited company and that I could use my SIPP to help with the purchase of premises to operate the practice from. I also wondered whether as a director, any income I may take could be by way of a share dividend rather than taking a taxable income from the SIPP. I had also thought that the property owned by my SIPP could eventually be sold to a SIPP established by my son.

I realise that I would need to take professional advice from an IFA when the time would come for any such arrangement to be set up, but if I had some idea now as to what might be possible even under the current rules, then I might not take any further taxable income from the SIPP in anticipation that it may be used for such a purpose and to keep the SIPP invested in cash or low risk funds in the meantime.

Any views at this time would be very much appreciated.

property.advert

I looked / am looking at commercial property through a SIPP. I understand that currently a SIPP can borrow 50% of its value to fund a purchase. That would put you in the circa £225k area. You may be able to buy a percentage of an asset (I do not know) but here you start to make things more complicated.

For your son's SIPP to purchase a building your SIPP owns outright then it would also have to be funded to 67% of the purchase price (to allow borrowing of 50%). How long would that take ?

I like the idea of your pension owning the property from which you undertake your business. It seems ideal though I am looking at it outside the EU.

jambobwana_2

Thanks for the reply. I've done more research since I originally posted and found a lot of useful information that can be downloaded from the website a company called Suffolk Life that answers a lot of my queries. Might be worth a look at for you for general background although they do say that they do not generally take on foreign property purchase.

However all valuations, leases etc on property bought with in a SIPP have to be done at fair market value so I'm not sure now how I can use this to provide any financial advantage for my son.