Using a Pension to purchase Land or Property For those investors who own or are considering the purchase of a commercial property, it can be extremely advantageous to consider holding the property within a Self-Invested Personal Pension (SIPP).
I f you already own commercial land or property which is mortgage free, it could be sold to your SIPP at market value which will provide a cash injection for you or your business. Alternatively, if you are looking to acquire commercial land or property, you could use the cash in your pension to purchase, or part purchase such property. If you have insufficient funds in your pension to do this, you could consider funding it by making a pension contribution which would usually attract Income tax relief at your highest rate of relief. SIPPs also have the ability to borrow up to 50% of the value of the fund at commercial rates, which may help to make a purchase possible and further increases the potential for capital growth and income in the future.
Once held in the SIPP, any growth in the value of the property will be free of Capital Gains Tax, and any rent generated will be free of Income Tax. The value of the property acquired will not form part of your estate for Inheritance Tax purposes. Ring fencing property within a SIPP can be a useful tool as, once owned by the SIPP, the asset will be protected in the event that you were to be declared bankrupt or the business became insolvent. Holding agricultural land in a SIPP A landowner may use a SIPP to purchase agricultural land from his own farm. The resulting cash could be utilised for further investment in the business or to provide for heirs who may not wish to continue in the farm.
The land could then be leased back from the SIPP to the farm, at market level rent. Any increase in the value of the land once held in the SIPP will be free of Capital Gains Tax. The rental income accumulated in the SIPP can be used to provide an income to the farmer in retirement or the pension assets can be sold to provide liquidity. If you would like further information about setting up a SIPP you should speak to an Independent Financial Adviser. Scrutton Bland offer an integrated financial and tax planning service which brings together tax and IFA expertise. If you would like to find out more about SIPPs please contact Michelle Groves , Independent Financial Adviser on 01206 838465 .
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