Property SIPPs Article Published: 15:21 13/02/2006 Article Classification: Waters Edge Cotswolds
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From April 6th 2006, business people will be able to put properties that they already own in a pension for the first time.

Advisors say professionals have most to gain. Many of them work in partnerships and own their business premises jointly. They will now be able to split the ownership of the property between their individual sef-invested personal pensions (SIPPs) in effect, creating a syndicate to benefit from generous tax breaks.

Pensions experts also hope that SIPP syndicates will offer a way round Gordon Browns U-Turn on residential property. In December, the chancellor disappointed the industry when he revoked plans to allow investors to hold buy-to-lets in SIPPs.

But they may be able to purchase residential property if they club together using real estate investment trusts (REITs), a new type of property scheme due to be launched next year.

Thousands of businesses and partnerships are expected to take advantage of the new rules on business property that form part of the shake up of the pension rules April 6 or A-Day.

At present, you can only usually invest in new business premises using a pension, you cannot generally use a pension to buy a property already owned by you, or your firm, or an associated person or organisation. This can include family members and other firms and you control.

But from A-Day, existing business properties can be moved into your pension. Many people are expected to set up SIPPs to enable them to do this. If more than one partner wants a share of the property, you can set up separate SIPPs and each to buy a share with your pension schemes, creating a SIPP syndicate.

You use money in the pension to buy the property. Although yhou already own the property the SIPP purchase has to be at market value. If you sell to the SIPP for less you could be hit by a tax charge.

The sale of the property to the SIPP could trigger capital gains tax CGT, but this is likely to be just 10% if you owned the property for more than two years and the benfits of putting the property in the pension scheme outweigh the tax.