Buying shops with SIPP

colinrt

Hello,
I am currently in the process of buying a block of 2 shops with 2 flats above. I have been advised that it would be tax advantageous to put them into a SIPP.
The deposit required is approx £55k.

I have the deposit money but I have now been advised that I'd need to have double that amount sitting a SIPP for it to work. (which I dont have).

Is this correct and if so, is there anything else I can do?

Many thanks
Colin.

dunstonh

I'm not sure a SIPP trustee would consider the properties due to the residential element.

SIPPs can borrow money but I think you will find yourself blocked before you even get that far.

dragonsoup

It may still be possible depending on your circumstances but it's a complex area. You need to find an IFA with experience in complicated SIPP property transactions.

colinrt

Hi,
Thanks for the replies, I was hoping the residential side could be overcome as the flats will be rented to the people who work in the shops below. If that were ok, does anyone know how much the sipp needs to be worth?
e.g the deposit required is approx £55k, so is it just the £55k or does it need to have more in it?

Thanks
Colin.

dragonsoup

colinrt wrote: »

Hi,
Thanks for the replies, I was hoping the residential side could be overcome as the flats will be rented to the people who work in the shops below.

Thanks
Colin.

It's not that simple I'm afraid. You need professional advice.

EdInvestor

Under the new rules the Sipp can only borrow 50% of its own value. Under the old rules (IIRC) it could borrow 75% of the value of the property it was buying.

A big difference.

jenko

The SIPP can only borrow 50% of its assets, so if you were to put your £55k into a SIPP it would then be grossed up to £70,512.82. This is how much you would be able to invest into the Commercial property. If the property you are looking at is worth £705,128.20 then your SIPP could own 10% of that property and you would own the rest outside of the SIPP. 10% of the rental income would be paid into the SIPP and would also grow in a tax free environment.

In regards to the flats above, the only way you would be able to include that in the SIPP is if it was written into the Employees contract that they would get use of the flat as part of their employment, before you put it into the SIPP.

For more advice I would recommend calling a SIPP provider who know what they are talking about - they will know more than most IFA's. Hornbuckle Mitchell are particularly knowledgable.

colinrt

Thanks Jenko,
I am starting to understand now, so if I could get around the residential element and put the deposit money into a sipp, based on the actual buying price being £190K do you think this would be the right way forward?

I also have a personal pension of about £30K, should I be looking to transfer this into the Sipp too, so that a larger percentage could be put into the Sipp?

colinrt

Any suggestions on this?