Am I running a property / land business for SIPP conts?

[eyeslikealemur]

I own a commercial property and some strips of land.

I'm currently buying some more land.

My aim in owning these items is to make a profit from them.

I don't siphon any of the income from the commercial property into my SIPP as I don't know if I'm allowed to.

If I'm running a property / land business then I can put profit from this into my SIPP (up to the annual allowance(s)).

If I'm not running a business (one commercial property on its own isn't a business) then I can't.

So - am I running a business or not?

Hit me.

[Panamax]

Who says owning and renting out one property can't be a business? Sounds like nonsense to me.

[Mr Pointy]

Why aren't you holding the properties themselves inside the SIPP?

[98elise]

Panamax said:

Who says owning and renting out one property can't be a business? Sounds like nonsense to me.

Agreed. It's a business when you start doing it for profit, not how many you own.

[TownIdiot]

It's all a bit cryptic but could the OP be talking about the difference between an invesment business and a trading business?

[Countdown]

eyeslikealemur said:

I own a commercial property and some strips of land.

I'm currently buying some more land.

My aim in owning these items is to make a profit from them.

I don't siphon any of the income from the commercial property into my SIPP as I don't know if I'm allowed to.

[b]If I'm running a property / land business then I can put profit from this into my SIPP (up to the annual allowance(s)).

If I'm not running a business (one commercial property on its own isn't a business) then I can't.[/b]

So - am I running a business or not?

Hit me.

You can put any money you like into a SIPP whether it's from running a business, a PAYE job, an inheritance, or a lottery win (up to the AA)

You could also transfer the commercial property into a SIPP to avoid any tax on the income or capital growth (although there would b CGT and possibly SDLT implications on the way in)

[eyeslikealemur]

I'm asking if income from one commercial property qualifies as 'Income chargeable under Part 2 ITTOIA 2005 immediately derived from a trade, profession or vocation.'

Income from one btl rental doesn't, although I suspect many btl owners don't know or do know but deliberately ignore that rule.

[TownIdiot]

I have always been told not.

Purely receiving rent is not seen a trading.

If you can persuade HMRC you are intending to be a property trading enterprise, or be involved in the trade of managing properties then that would be a different matter.

Edit

So a Sipp can hold a commercial property and receive rent. It can profit from the sale of the property.
But it cannot be seen to be trading - ie buying flipping properties on an ongoing basis.

I am sure the lines are blurred at the edges of this.

Edited by TownIdiot on Sunday 13th October 16:38

[eyeslikealemur]

TownIdiot said:

I have always been told not.

Purely receiving rent is not seen a trading.

If you can persuade HMRC you are intending to be a property trading enterprise, or be involved in the trade of managing properties then that would be a different matter.

Edit

So a Sipp can hold a commercial property and receive rent. It can profit from the sale of the property.
But it cannot be seen to be trading - ie buying flipping properties on an ongoing basis.

I am sure the lines are blurred at the edges of this.

Edited by TownIdiot on Sunday 13th October 16:38

Thanks - yes it's not clear legislation.

If I buy another commercial property then I'm trading.

Not sure if 1 commercial and 1 btl qualifies.

Also not sure if a single mixed commercial / residential in a single property qualifies.

I could ask, but I'd rather not, so I've asked here instead as it looks like there are people who know on PH.

Quite a varied crowd.

[TownIdiot]

You can have multiple properties and not be trading.


Buying and selling properties is trading.

Buying properties in order to receive rent is not trading
Selling a property for a profit isn't necessarily trading.

I suppose there's an element of the sniff test about it, without there being an absolutely firm line.

As an example

I had two commercial properties in my pension. Received the rent for years.
Applied for.planning change of use and sold one.
About to do the same on the other.

This won't be deemed as trading.

If I was doing it constantly it would be.

Also had a company with one building that was mixed use and was classed as an investment business.

If I wanted to run my current office as a shared co-workspace that would be considered trading so I couldn't do it in a pension - I'd have to lease it to a separate entity who could then conduct that trade.

Edited by TownIdiot on Sunday 13th October 17:35

[eyeslikealemur]

How is buying / owning land as well as commercial property viewed?

Do you have to sell within a certain timeframe to be trading, or is the intention to make a profit sufficient?

Can you sit on plots for years and still be trading?

I have a couple of ransom strips and I am buying another plot to rent out.

I feel like I'm trading.

[TownIdiot]

eyeslikealemur said:

How is buying / owning land as well as commercial property viewed?

Do you have to sell within a certain timeframe to be trading, or is the intention to make a profit sufficient?

Can you sit on plots for years and still be trading?

I have a couple of ransom strips and I am buying another plot to rent out.

I feel like I'm trading.

In my pension I have land and commercial property.
I have a professional trustee or who is very conservative and allows this as investment.

[TownIdiot]

Submit your tax returns on the basis of trading the.

What's the worst that can happen?

[Panamax]

If you're doing all this stuff and don't have an accountant or other professional advisor you might find it useful to get one.