Can a Sipp be paid Tax free into a limited company?

1962Tycoon

Hi , does anyone know the answer to this?



Can a SIPP be paid tax free into a limited company?



I transferred my company pension into a SIPP earlier this year . It took almost a year to transfer . I was made redundant from the company just after they changed the pension early leaving rules so that it was not sensible to take it early Previous rule i would have got 70% of full penson at 53 New rule only get 40% of full pension. Hence the transfer to get an income as i am now 56.
I was told yesterday by a friend in business that i could transfer it tax free into a limited company that i could set up then use the company to purchase property for income . I already run a couple of buy to let properties but just pay tax as an individual .
Any thoughts on this would be appreciated. Many thanks .

dunstonh

I was told yesterday by a friend in business that i could transfer it tax free into a limited company that i could set up then use the company to purchase property for income .

Maybe that friend would like to explain how a SIPP can do that.

I already run a couple of buy to let properties but just pay tax as an individual .

The trend is to do BTLs via a limited company. So, that bit is fine. its a bit more awkward if you already hold properties but still possible over a period and subject to personal scenario.

1962Tycoon

Thanks for the reply , i was Sceptical when he told me and will enquire further when i see him next but he was adamant that he had done it to set up his business . However i called it my Pension and didn't mention how it was held .

The conversation started as i mentioned it had lost 35k in the jitters last week . As its new i have a look to see how it is performing regularly . The Adviser to the company said not to do that just look monthly . In the future i may manage it myself if thats possible as the fees are nearly the same as my income.


The BTL limited company bit has been mentioned before but i didn't think it was worth it for 6k a year which is the profit barring boiler breakdowns etc.

dunstonh

The conversation started as i mentioned it had lost 35k in the jitters last week .

Nothing that happened over the last few weeks is unusual or uncommon. It was a simple correction. It would need to be double that to be a crash. And quadruple it for a depression style loss similar to early millenium and credit crunch periods.

A loss of 35k may or may not be much relative to the amount invested. £35k loss on £300k is nothing. £35k loss on £80k is a lot.

As its new i have a look to see how it is performing regularly .

You should not do that. It is a recipe for disaster. Let the zig zags occur naturally without you seeing them.

In the future i may manage it myself if thats possible as the fees are nearly the same as my income.

Yes you can DIY. However, like any DIY if you do it well you can save money. If you do it badly it can cost you a lot more than a professional.

kidmugsy

1962Tycoon wrote: »

Can a SIPP be paid tax free into a limited company?

This sounds to me (but I am an amateur) like a garbled account of something you can do, namely lend money from your SIPP to your company as long as the loan is secured on property - I assume BTLs would do for that role. I think I'm right in saying that you first transform your SIPP into a Small Self Administered Scheme (SSAS).

Another thing that's possible is for a SIPP to buy a property - e.g. office space or factory space - and then rent it to a business.

Anyway, here's a link to begin from.
https://citywire.co.uk/money/sipp-vs-ssas-what-s-best-for-small-business-owners/a695959

1962Tycoon

Thanks again for the reply . it is about 8% so not too much but equal to 3 years income . Lets hope it goes back up but with Brexit who knows ? Probably drop to half .:mad:

I will let them run it for a couple of years and see how it goes . It is just galling that i get a 3% yield and they get 2.5% fee each year .
I will keep looking at its performance until i get bored . I dont scare easily .

1962Tycoon

Thanks for the link i had never heard of an SSAS .
I knew a sipp could go into property but i believe only Business premises . I have only dealt in residential and was considering a couple of student let houses or flats.

dunstonh

Lets hope it goes back up but with Brexit who knows ? Probably drop to half .

Brexit is playing out in Sterling rather than the markets. A bad Brexit will likely see your investment value rise.

I will let them run it for a couple of years and see how it goes . It is just galling that i get a 3% yield and they get 2.5% fee each year .

Yield is only part of the equation. Usually the smaller part. It is total return that matters. Not just Yield. 2.5% i n charges is high. You shouldnt look to breach the 2.0% (exc transaction charges).

kidmugsy

1962Tycoon wrote: »

I knew a sipp could go into property but i believe only Business premises . I have only dealt in residential and was considering a couple of student let houses or flats.

My impression is that the pension rules explicitly exclude pensions owning residential property - at least the sort of pensions we're discussing here. Whether that excludes even holiday lets I don't know.

On the other hand it looks as if an SSAS linked to a company can lend money to the company which the company could put towards purchasing residential property.

You could consider investing within your SIPP in companies that invest in residential property. There are two names known to me - Grainger, Hearthstone - but there are presumably others too.

Personally, I strongly suspect that now is not a time to enter the residential property biz.

Thrugelmir

1962Tycoon wrote: »

Thanks again for the reply . it is about 8% so not too much but equal to 3 years income . Lets hope it goes back up but with Brexit who knows ? Probably drop to half .:mad:

Your investments have gained due to Brexit. The recent falls are more to do with global trade wars , Italy. Fall in new car sales in China etc. Rise in US interest rates. Share prices eventually have to be priced to reflect reality. Not just investors expections that markets will rise indefinately.