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The benefits.

There are many advantages to using a self invested pension scheme 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
  • contributions to the pension scheme and any basic rate tax relief can be used to purchase the property
  • any gain on the value of the property when sold should be free from Capital Gains Tax
  • open market rent is paid to the pension scheme and all rent from tenants is received gross and is free from Income Tax
  • rental income payable by the tenants can be treated by them as a business expense for tax purposes and can reduce the income and corporation tax liability of the tenant
  • property is outside the member’s estate for Inheritance Tax purposes
  • 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 commercial property values can be as susceptible to fluctuations as to other market sectors
  • property is considered an ‘illiquid’ investment which means it may take time to realise its value. This can be a problem, for example, if your client is close to taking benefits
  • issues such as environmental risk or restrictive covenants, can slow the transaction process significantly.

Before commiting to purchasing commercial property within a Dentons SIPP or SSAS, clients should take into account various considerations.


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