SIPP Commercial Property Purchase

midlandsimon

Me and my wife both have a SIPP with InvestAcc which is working really well for us with a DFM and cash deposits. Our adviser (along with accountant) at our annual review  suggested we purchase our company trading premises through our SIPPs, releasing funds to the company and then our company pay rent to the SIPP ongoing. Speaking to InvestAcc, they make the process seem simple but just wondered if anyone has bought commercial property through their SIPP and anything to look out for?

Vespaboy

Hi 

not advice but

lots of tax advantages and I am sure that your IFA will be able ( or should be able to advise ) but points to think about

1. once property is in SIPP name it is governed by the SIPP providers rules they have - you as the member are the beneficiary not the sole legal owner as such so you can not just do what you want,  a lot of members get this bit mixed up ! e.g. works to the property by the Trading company are governed by the lease - consent required etc so sort out consents for what the trading company wants to do ( fit out ) before the lease is entered into
2. your trading company needs a lease - rent is governed by a RICS  valuation and the lease needs to be a proper commercial lease, as the "owner" you want one as well
3. company will probably pay SDLT on the lease and costs to register along with various other cost etc. SIPP also has SDLT etc on the purchase - VAT on the purchase ?
4. form of lease largely governed by the SIPP requirements on property ( they all are a bit different in what they want but it has to stack up with a valuation etc )
5. If you are borrowing money to buy then getting funding is a bit harder in that there are more "hoops" to jump through, lending limits are lower with a SIPP as it is geared to the amount of money in the SIPP
6. process is longer than usual for all parties concerned and there will be more fees as more people are involved in the process
7. depending on the who the shareholders of the company then if you and your wife are not the majority shareholders then you can create conflicts of interest and differing objectives etc

It is generally a good idea, certainly tax wise but go in with your eyes open - I suspect Investec will have a lot of information on this so read it

You need to take advice  not on a forum  read the information and ask the questions etc

VB

waveneygnome

I looked into this a few years back, but came to the general conclusions:

Lots of fees involved in moving the property into the Sipp
Ongoing 'property fees' payable every year

There were not many providers offering this type of service/limited competition/fees tended to be high.

(I don't know InvestAcc;  so worth checking the fees with them)

My accountant came to the conclusion that for any property under £500k....it was too much red tape/constrictions;  but for larger properties there are significant tax savings to be had.

midlandsimon

Vespaboy said:

Hi 

not advice but

lots of tax advantages and I am sure that your IFA will be able ( or should be able to advise ) but points to think about

1. once property is in SIPP name it is governed by the SIPP providers rules they have - you as the member are the beneficiary not the sole legal owner as such so you can not just do what you want,  a lot of members get this bit mixed up ! e.g. works to the property by the Trading company are governed by the lease - consent required etc so sort out consents for what the trading company wants to do ( fit out ) before the lease is entered into
2. your trading company needs a lease - rent is governed by a RICS  valuation and the lease needs to be a proper commercial lease, as the "owner" you want one as well
3. company will probably pay SDLT on the lease and costs to register along with various other cost etc. SIPP also has SDLT etc on the purchase - VAT on the purchase ?
4. form of lease largely governed by the SIPP requirements on property ( they all are a bit different in what they want but it has to stack up with a valuation etc )
5. If you are borrowing money to buy then getting funding is a bit harder in that there are more "hoops" to jump through, lending limits are lower with a SIPP as it is geared to the amount of money in the SIPP
6. process is longer than usual for all parties concerned and there will be more fees as more people are involved in the process
7. depending on the who the shareholders of the company then if you and your wife are not the majority shareholders then you can create conflicts of interest and differing objectives etc

It is generally a good idea, certainly tax wise but go in with your eyes open - I suspect Investec will have a lot of information on this so read it

You need to take advice  not on a forum  read the information and ask the questions etc

VB

Thanks VB- really useful

midlandsimon

waveneygnome said:

I looked into this a few years back, but came to the general conclusions:

Lots of fees involved in moving the property into the Sipp
Ongoing 'property fees' payable every year

There were not many providers offering this type of service/limited competition/fees tended to be high.

(I don't know InvestAcc;  so worth checking the fees with them)

My accountant came to the conclusion that for any property under £500k....it was too much red tape/constrictions;  but for larger properties there are significant tax savings to be had.

Fees dont look to bad-

Annual Fee- £400 
Property Fee- £350 

Did a quick market comparison and couldn't find anything better value. Plus my SIPP is with InvestAcc currently so always makes things easier!

Did you do anything with the property in the end or leave the idea compeltely?

waveneygnome

I bought the property within the limited trading company. 
Normal commercial mortgage:  30% deposit / 70% loan.
(Have been making big overpayments/was 15yr term....will be paid off in 6)

Those fees look really good........will have to check out InvestAcc.

HettieMaxDog

Hi midlandsimon,

My wife and I are in a similar situation as you and our Accountant suggested putting our commercial propert in a SIPP.  We both currently have SIPPs that doesn't allow commercial property investment so would need to shop around.  I wondered whether you went ahead with InvestAcc and how you found the process and whether there were more fees than you expected that those you mentioned above.  Many thanks in advance.

midlandsimon

Hi @HettieMaxDog, apologies i hadnt seen your message. Yes we went ahead with InvestAcc and i cannot speak more highly of them. Really smooth process and the communication was excellent right through. Our company pays our rent into the scheme which is then sent on to our individual investment portfolios. Would highly recommend InvestAcc if you are looking to proceed.