DP Pensions Ltd

Property

Both SIPPs and SSASs can be used to hold property and the rules for both types of pension scheme are exactly the same.

What are the tax benefits of investing in property through your pension?

Assets held in your pension scheme are exempt from both Capital Gains Tax and Income Tax. This means that your pension will pay no tax on the growth in value of the property and no tax on the rental income received from it.

What type of property can your pension invest in?

Our pension plans can be used to purchase freehold or leasehold commercial property and land. This includes offices, factories, warehouses and shops as well as farm and development land.Your pension cannot be used to purchase residential property including ground rents (even if it is to be converted to commercial use and planning permission for such a conversion has been obtained).The one exception to this rule is where the residential property forms part of a commercial property, such as a caretaker’s flat above a shop, where it is occupied by an unconnected employee as a condition of his or her employment.Commercial properties with a residential aspect, such as hotels, guest houses and nursing homes, are permitted as long as you (or any other connected parties) do not use the facilities other than at a commercial rate.

Can you borrow money to fund the purchase of property?

Your pension can borrow to help fund the purchase and /or development of property (as well as for other purposes). The borrowing rules are covered in more detail on the next page.

Who can you buy property from?

Your pension arrangement can purchase property on the open market or from a connected party such as you personally, your business or a person connected to you. If the property is purchased from a connected party then the purchase price must be the open market price supported by a professional valuation.

Who can you let property to?

The property can be leased to a third party, or to your business. If the property is leased to your business, then the lease must be granted on commercial terms with an open market rent.

Can you buy property jointly with other parties?

Your pension can purchase property jointly with other parties. Those parties include other pension schemes as well as with you personally, your business or others. The property will be held in trust with each participant being entitled to a percentage of the property value and rental income. This percentage is determined by how much each participant contributed towards the purchase price.

What if the property is subject to VAT?

If the property is subject to VAT then we will register your pension for VAT. This will enable us to reclaim the VAT paid on the purchase price. It will also mean that all rent charged on the property will be subject to VAT and the ultimate sale of the property will also be subject to VAT.

Can you develop land held by your pension?

Your pension can develop any land or property that it holds but the cost of the development must be met by the scheme. If you opt to tax the property for VAT purposes then we can reclaim the VAT paid on contractor’s invoices.

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