Pension purchase of new commercial property

[Ziplobb]

Little bit unsure of how to do this - I think I know what I want to do - any advice appreciated before I try and find someone to sit down with and chat.

I want to buy another shop and pay for it with a pension that I do not yet have or have funded.

My question relates to 'connected parties'

Can a company that myself and my wife are shareholders/directors of buy the new shop and then in 2 or 3 years when our pension is funded buy it from the limited company ? Pension would be for benefit of myself and my wife ultimately.

Or any other ideas about how to do this - I (pension fund) am not inclined to borrow ?

[tight fart]

Ltd company buys shop, then you want to transfer it to a private pension 2 years down the line?

Just checking I’ve got the question right.

[Ziplobb]

Yep that’s the kind of thing. Got the cash just can’t get it all into a pension in one tax year.

[Deesee]

Op,

Are you planning to buy the property ‘cash’, then make contributions (more cash) to the pension to buy the property?

(You’ll have 2x legals 2x everything else).

Would it not be worth talking to the existing owner and perhaps taking a short lease/licence with a cash consideration (deposit) to purchase at ‘x’ tax year?

[JulianPH]

There are no such thing as connected parties when it comes to your pension buying a commercial property from you or your business.

So you are completely free to go ahead as you planned.

Also if you or your wife had any other type of pension in place for the last 3 tax years (regardless of whether you made a contribution or not) then you can claim back any unused pension allowance for those years. This may enable you to fund the purchase in one go straight into your pension.

If you would like to have a chat about this please feel free to PM me.

[Stay in Bed Instead]

JulianPH said:

There are no such thing as connected parties when it comes to your pension buying a commercial property from you or your business.

There rather is you know.

It means that any transaction must be a 'market rate'.

[JulianPH]

Stay in Bed Instead said:

JulianPH said:

There are no such thing as connected parties when it comes to your pension buying a commercial property from you or your business.

There rather is you know.

It means that any transaction must be a 'market rate'.

May I respectfully add that there is not, don’t you know!

All pension transaction must be at market rates, not just this type (in isolation).

I understand your point though.

[Stay in Bed Instead]

JulianPH said:

May I respectfully add that there is not, don’t you know!

All pension transaction must be at market rates, not just this type (in isolation).

I understand your point though.

If you can buy a property at under market rate from an unconnected third party then HMRC don't care. There is no obligation to pay market rate.

If you buy under market rate from a connected party then HMRC do care. Look up value shifting for example.

[Vivalas]

JulianPH said:

There are no such thing as connected parties when it comes to your pension buying a commercial property from you or your business.

So you are completely free to go ahead as you planned.

Also if you or your wife had any other type of pension in place for the last 3 tax years (regardless of whether you made a contribution or not) then you can claim back any unused pension allowance for those years. This may enable you to fund the purchase in one go straight into your pension.

If you would like to have a chat about this please feel free to PM me.

This is wrong Julian, they would be connected parties in this case so it would have to be at the exact valuation and rental valuation as under HMRC rules. If they didn’t have any connection there is the possibility of up to 10% either side - again HMRC rules.

[Ziplobb]

thanks for the replies
the transaction is at market rate - I have no desire to manipulate this - the purchase is a matrimonial and so no opportunity to lease and then buy after a couple of years.

[Caddyshack]

I think people are mis-interpreting what Julian has said. He has confirmed it must be at market rate....the connected parties is the bit he is saying is not relevant re the pension (I think)

[Vivalas]

Caddyshack said:

I think people are mis-interpreting what Julian has said. He has confirmed it must be at market rate....the connected parties is the bit he is saying is not relevant re the pension (I think)

In that case he’s made a mistake by using the word ‘connected’ parties then as this is a very specific wording with SIPPS. In fact it’s mentioned a number of times on the application form - providers are quite specific about it to not fall foul of HMRC rules. A huge number of SIPP property purchases are ‘connected party’ transactions as many business owners have realised their equity in their commercial properties by selling them to their pension fund.

[JulianPH]

Caddyshack said:

I think people are mis-interpreting what Julian has said. He has confirmed it must be at market rate....the connected parties is the bit he is saying is not relevant re the pension (I think)

Thank you.

I was trying to address the specific point the OP was asking about, not go into depth on other factors that had not been raised.

So my answer related solely to the question on whether the rules prevented the sale/purchase of the property between connected parties, not the market value rule, which I considered to be obvious.

[Jockman]

Ziplobb said:

Little bit unsure of how to do this - I think I know what I want to do - any advice appreciated before I try and find someone to sit down with and chat.

I want to buy another shop and pay for it with a pension that I do not yet have or have funded.

My question relates to 'connected parties'

Can a company that myself and my wife are shareholders/directors of buy the new shop and then in 2 or 3 years when our pension is funded buy it from the limited company ? Pension would be for benefit of myself and my wife ultimately.

Or any other ideas about how to do this - I (pension fund) am not inclined to borrow ?

Yes

We did

No problem.

Julian’s point about having a pension in place is pertinent. You could fund this immediately through your pension, cash flow permitting.

Double legal fees is annoying but keep your eye on the prize.