Buying a commercial property via a SIPP - VAT query

[Justhe-1]

I’m looking to purchase a commercial unit for additional storage (for our business) via my SIPP, which I plan to lease back to the business, with rent to be paid back into the SIPP tax free.

I’m aware I can borrow up to 50% of the current SIPP value, but am trying to avoid that, and find something that suits based on the current cash value (of said SIPP).

I’ve found somewhere that fits the bill size and location wise, but the vendor has elected for VAT to be chargeable, even though the unit is over 3 yrs old.

I’ve asked if this is fixed, and apparently so. I would have to fund the VAT amount (circa £100k) from outside the SIPP. I know I can claim back the VAT, which would take around 3 months, which isn’t really an issue - however, I’m being advised that if purchasing via the SIPP, the VAT once reclaimed would be subsequently paid back into, and therefore locked into the SIPP Pension, which doesn’t work - I’d need to repay these funds back into our “house fund savings”.

Does anyone have any experience of this, or know what options I have to account for the VAT element separate, or even why the unit for sale is having VAT applied (its 15 years old, with no real value-add works or enhancements)?

Thanks.

[Rufus Stone]

The SIPP will need to register for VAT, and Opt to Tax the property. You can lend the SIPP the VAT money and be repaid once the VAT is reclaimed.

Is the vendor an owner occupier or landlord?

If he is willing to grant your business a lease before your SIPP purchases it, then Transfer of a Going concern would apply and no VAT would be payable. SIPP still needs to register for VAT and Opt to Tax.

[Justhe-1]

Rufus Stone said:

The SIPP will need to register for VAT, and Opt to Tax the property. You can lend the SIPP the VAT money and be repaid once the VAT is reclaimed.

Is the vendor an owner occupier or landlord?

If he is willing to grant your business a lease before your SIPP purchases it, then Transfer of a Going concern would apply and no VAT would be payable. SIPP still needs to register for VAT and Opt to Tax.

That’s interesting, thanks RS.

Vendor is owner occupier, and unit is now empty (apart from an old Maybach that he apparently purchased new, so must have lost a fortune on it..!)

I’ll def ask the question of the agent re the grant of lease, see what they say.

As its a new SIPP I was thinking about using the last 3 years retrospective full allowance to cover, but again that would then be locked into the SIPP. Wasn’t aware you could lend money into it & be repaid..

All food for thought, Many Thanks.

[RJD223]

Rufus Stone said:

You can lend the SIPP the VAT money and be repaid once the VAT is reclaimed.

Interesting - we were in exactly the same position around 8 years ago and was told this couldn't be done. One it's in - it's in - so to speak.

With the refurbishments we had to do it certainly made things a bit tougher at the time but it did give us a decent sum to put in our investment scheme once it was claimed and paid back.