Various properties can be held in a SIPP such as retail units, office, warehouse and even surgeries, hotels, pubs and agricultural land. Your SIPP cannot own the property and operate the business run from the property, however, a lease can be put in place between the SIPP beneficiary and operating company owner.
Why hold your property in a SIPP
Any growth in the value of a property held in a SIPP is free from Capital Gains Tax (CGT) and the rental income received is also tax free.
You are able to borrow up to 50% of the net fund value to purchase a property.
There may be tax advantages where your business occupies a premises owned by your SIPP as the rent paid to your SIPP is a deductible business expense, therefore reducing corporation tax.
Valuations may be required by your SIPP regulator and HMRC when you are taking retirement benefits, if you are already in capped drawdown, or reviewing your income limits. Income limit reviews will be required every three years up until the age of 75, after which they are required annually. It is the role of the Valuer to appraise the property value and produce a Red Book compliant valuation report for your administrator.
In addition, lease events such as expiry, rent reviews, re-gears and surrenders/breaks will also require the input of a valuer. When creating a lease between your SIPP and your operational company we can assist in ensuring you are achieving the best market terms and advise you on the long term implications of your decisions.
Often landlords and tenants file away the lease after signing it. In reality, a lease requires actions by both parties throughout the term, most notably around maintenance and repair, and towards the lease expiry dilapidations. We can advise to make sure the correct entity is maximising the cashflow potential at any one time.