Use Your Sipp to Purchase Property With a Business Partner

By: Emma

Q.? My business partner and I are looking to buy new commercial premises.? I want to buy my share using my SIPP but my partner does not have one.? Is it possible for a??to purchase a property with a non-SIPP co-owner?

A.? Yes, it is possible for you to purchase your property using your SIPP with a non-SIPP co-owner.? It makes no difference at all.? The only difference being that your partner will own his half, where as your SIPP will own your half of the property.? You will also have to pay rent into your SIPP every month.It is possible for the trustees of your SIPP to borrow money from a commercial lender in order to assist with the purchase of suitable property.? HMRC guidelines state that the Trustees can borrow up to 50% of the net asset value of the SIPP, as calculated immediately before the borrowing takes place.? This limit includes all existing borrowing.? The rent receiveable by the tennants of the property must exceed the loan repayment and the interest due on the loan.

The term of the loan may not be any longer than 5 years, although a loan can be rolled over once, subject to there being sufficient security i.e. first charge over assets which have greater than or equal value to the loan amount.? Interest must be charged at a minimum of 1% above base rate rounded up to the nearest 0.25%.? The loan must be repaid over the term. The repayments must include capital as well as interest.

There are many benefits from using your SIPP to purchase commercial property as an investment tool.? For example, you will receive a rental income into your SIPP, long term capital appreciation, lower volatility than equities and borrowing is available to assist your purchase (up to 50% of your fund).

Also there is the ability to buy the property for your business without being a capital expense and when you come to sell the property, it will be free of Capital Gains Tax.? The question I want to ask is - Why hasn't your business partner got a SIPP?!

Real Estate
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