The benefits.

There are many advantages to using a self invested pension to purchase commercial property – but there are also some important things to remember.

Key advantages:

• Opportunity to borrow funds towards the purchase and development of the property
• Tax relief on contributions to the pension scheme used to purchase the property
• Any gain on the property value is free from Capital Gains Tax
• Open market rent is paid to the self invested pension and is free from income tax
• Rental income payable by the tenants can be treated by them as a business expense for tax purposes
• Property is outside the member’s estate for Inheritance Tax
• Property is owned outside of the business so is protected from creditors in the event of insolvency

But remember...

• Using all of your client’s funds to invest in property could increase their investment risk
• Recent history suggests that property values can be as susceptible to fluctuations as other market sectors
• Property is considered an ‘illiquid’ investment which means it may take time to realise its value. This can be a problem if your client is close to taking benefits
• Environmental issues – or strange covenants – can slow the transaction process significantly.