Commercial Property / SIPP
Discussion
Hi all,
I run a small office based business and have until now been in serviced offices.
A nice office has come up for sale local to me, and I would like to buy it via a SIPP and then rent it to my company. I may also sub-let part of it to a third party.
My SIPP does not have enough funds to make the purchase so I will borrow some funds (less than 50% of the SIPP value) from my company and this will be repaid over 3 / 5 years.
The purchase is subject to VAT though the SIPP will opt to tax so I will get that back.
There seems to be a reasonable amount of cost in getting it all set up given IFA / lawyer / surveyor / SIPP company, but the benefits seem to make it a no brainer.
It is also possible that, another day, the building may be converted to residential which would mean I would need to extract it from the SIPP.
Has anyone taken a similar step, and if so am I missing anything?
Thanks for any help you can offer!
I run a small office based business and have until now been in serviced offices.
A nice office has come up for sale local to me, and I would like to buy it via a SIPP and then rent it to my company. I may also sub-let part of it to a third party.
My SIPP does not have enough funds to make the purchase so I will borrow some funds (less than 50% of the SIPP value) from my company and this will be repaid over 3 / 5 years.
The purchase is subject to VAT though the SIPP will opt to tax so I will get that back.
There seems to be a reasonable amount of cost in getting it all set up given IFA / lawyer / surveyor / SIPP company, but the benefits seem to make it a no brainer.
It is also possible that, another day, the building may be converted to residential which would mean I would need to extract it from the SIPP.
Has anyone taken a similar step, and if so am I missing anything?
Thanks for any help you can offer!
My only comment is that I have seen situations where companies are hampered by the fact that they have a lease from the SIPP, and the fact that acting in the best interest of the SIPP actually gets in the way of making commercial changes that suit the actual business.
For example business had outgrown premises, needed to move. A surrender was pretty much impossible to negotiate without a replacement tenant being actually in place ready to pay same rent in a declining market. Similarly could not agree a reduction in rent. Awkward.
For example business had outgrown premises, needed to move. A surrender was pretty much impossible to negotiate without a replacement tenant being actually in place ready to pay same rent in a declining market. Similarly could not agree a reduction in rent. Awkward.
As you have a Ltd, look into a SSAS as well as a SIPP.
You will likely have more control of a SSAS than a SIPP, and the overall the cost may well be cheaper too (especially if property, borrowing, subletting & VAT).
I think some SIPP providers will not be happy your Ltd lending to the SIPP, and will insist on independent commercial borrowing.
Where are you based?
You will likely have more control of a SSAS than a SIPP, and the overall the cost may well be cheaper too (especially if property, borrowing, subletting & VAT).
I think some SIPP providers will not be happy your Ltd lending to the SIPP, and will insist on independent commercial borrowing.
Where are you based?
That's a good point re. surrender. I was going to try and build in a few break clauses into the lease from the SIPP to Ltd to try and manage that risk.
I'm based near Reading, but think I am OK with the lending point. IFA has been advising so far and has not flagged up anything about it being an issue. I guess we will see when I make the SIPP application.
I will also look at SSAS, thanks for that.
I'm based near Reading, but think I am OK with the lending point. IFA has been advising so far and has not flagged up anything about it being an issue. I guess we will see when I make the SIPP application.
I will also look at SSAS, thanks for that.
Some good advice above. Especially regarding the surrender issues.
The best advice is speak with a decent accountant as it's important that all of your circumstances are factored in.
If you're going to convert to residential sometime in the foreseeable future, this will probably not be the right approach IMO.
I've only heard of one work around which I've not tried myself but know someone who has. I've spoken (at length) with my pension provider and they wouldn't let me do it. However, I did find another provider who potentially would. Just depends if you're comfortable putting yourself in a grey area... Personally, I'm not. Especially with investments like this.
In terms of it being a 'no brainer' - you're right, as long as this is going to be a long term thing for you. The fees to make it happen will be high, the hassle and paperwork is off the scale, and the pension laws could change... unlikely to be anytime soon, but something to keep in the back of your mind.
It's certainly a tax efficient way of doing things, although it's important that you're happy with all of the implications.
I've just been through the process of purchasing some commercial property, it's certainly not easy to set it all up correctly!
The best advice is speak with a decent accountant as it's important that all of your circumstances are factored in.
If you're going to convert to residential sometime in the foreseeable future, this will probably not be the right approach IMO.
I've only heard of one work around which I've not tried myself but know someone who has. I've spoken (at length) with my pension provider and they wouldn't let me do it. However, I did find another provider who potentially would. Just depends if you're comfortable putting yourself in a grey area... Personally, I'm not. Especially with investments like this.
In terms of it being a 'no brainer' - you're right, as long as this is going to be a long term thing for you. The fees to make it happen will be high, the hassle and paperwork is off the scale, and the pension laws could change... unlikely to be anytime soon, but something to keep in the back of your mind.
It's certainly a tax efficient way of doing things, although it's important that you're happy with all of the implications.
I've just been through the process of purchasing some commercial property, it's certainly not easy to set it all up correctly!
Edited by madmover on Friday 12th February 07:16
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madmover said:
Some good advice above. Especially regarding the surrender issues.
The best advice is speak with a decent accountant as it's important that all of your circumstances are factored in.
If you're going to convert to residential sometime in the foreseeable future, this will probably not be the right approach IMO.
I've only heard of one work around which I've not tried myself but know someone who has. I've spoken (at length) with my pension provider and they wouldn't let me do it. However, I did find another provider who potentially would. Just depends if you're comfortable putting yourself in a grey area... Personally, I'm not. Especially with investments like this.
In terms of it being a 'no brainer' - you're right, as long as this is going to be a long term thing for you. The fees to make it happen will be high, the hassle and paperwork is off the scale, and the pension laws could change... unlikely to be anytime soon, but something to keep in the back of your mind.
It's certainly a tax efficient way of doing things, although it's important that you're happy with all of the implications.
I've just been through the process of purchasing some commercial property, it's certainly not easy to set it all up correctly!
I agree with Madmovers comments except I'd be recommending you speak to an IFA/lawyer as they'd be setting up the paperwork & will be able to advise on what's workable/acceptable for both the landlord/tenant....the inclusion of break options might not be a viable one for your investment vehicle unless your business is prepared to pay a premium for such benefits as they might be considered too tenant friendly & not necessary in the open market (hence the expression "arms length negotiations). The setup costs are a reflection in such cases of proving things are drawn up properly.The best advice is speak with a decent accountant as it's important that all of your circumstances are factored in.
If you're going to convert to residential sometime in the foreseeable future, this will probably not be the right approach IMO.
I've only heard of one work around which I've not tried myself but know someone who has. I've spoken (at length) with my pension provider and they wouldn't let me do it. However, I did find another provider who potentially would. Just depends if you're comfortable putting yourself in a grey area... Personally, I'm not. Especially with investments like this.
In terms of it being a 'no brainer' - you're right, as long as this is going to be a long term thing for you. The fees to make it happen will be high, the hassle and paperwork is off the scale, and the pension laws could change... unlikely to be anytime soon, but something to keep in the back of your mind.
It's certainly a tax efficient way of doing things, although it's important that you're happy with all of the implications.
I've just been through the process of purchasing some commercial property, it's certainly not easy to set it all up correctly!
Edited by madmover on Friday 12th February 07:16
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