The commercial real estate market presents a rare SIPP opportunity

Acquiring commercial property through a SIPP is one of the smartest and most tax-efficient investments an individual can make, says Lisa Bardell, Manager of Business Partnerships at Options.

In short, the owner of SIPP receives rental income from the property tax free and incurs no CGT liability when selling the property.

Yet, although there is no obligation for the owner of the SIPP to operate any form of commercial enterprise to enjoy these benefits, the advantages for business owners multiply when they acquire their own premises. commercials using a SIPP and effectively become tenants of their own property. .

In this case, the owner’s company pays regular market rent to the SIPP; this reduces the taxable income of the member company, freeing up capital for investment.

Second, as we have already noted, the rent paid by the company accumulates tax-free within the SIPP, income that could be used to invest in other asset classes.

In addition, the SIPP holder and the company benefit from increased stability. The business has a stable owner who has no intention of selling, while the owner benefits from a stable tenant who can be relied on to pay the rent.

But isn’t it a strange time to be touting the benefits of commercial real estate investing?

It’s not, says Lisa Bardell (pictured), head of business partnerships at Options UK, the independent and regulated provider of SIPP and corporate pension plans, who has witnessed a constant stream of purchases of real estate related to the SIPP in the last 12 months.

“There have been a number of encouraging signs in the commercial real estate industry since the start of the year,” notes Bardell. “For example, we get more requests and transaction prices are less inflated than before, which makes negotiation easier,” she adds.

The market has been described as “quietly buoyant”. In August, Savills announced that the value of commercial property investments had risen to £ 31.4 billion at the end of July, a 32% increase from the same period last year. The following month, Colliers published an article forecasting 9% growth in commercial property values ​​for all of 2021.

“Many of our clients are already recognizing this latent dynamism,” says Ms. Bardell, “but we believe that the benefits of using a SIPP to purchase commercial property is a process worth disseminating to a wider audience.”

The Milton Keynes-based company takes the bull by the horns and launches a multimedia campaign, including a series of jargon-free documents and articles, titled What Are Your Options? designed specifically for individuals who wish to purchase commercial property either through their SIPP or in conjunction with others as part of a partnership / syndicate.

Among the topics planned to be covered by What are your options, there are features on:

  • The important tax advantages and intangible advantages offered to SIPP real estate investors.
  • Leverage: How SIPPs can use relatively inexpensive mortgages to purchase commercial property.
  • How do SIPP real estate partnerships / syndicates work?
  • HMRC Rules for Owner / Occupant SIPPs
  • SIPP real estate administration: lease renewals, VAT registration and related issues.
  • Can my business buy more than one commercial property?
  • From shopping parks to distribution centers: real estate SIPPs for the online age.

Bardell, who leads the development of commercial property solutions related to SIPP Options UK, believes it is important for business owners to consider or consider acquiring their premises using their SIPP. “Understand the difference between SIPPs created specifically for this purpose and those designed only to include a range of other standard regulated asset classes.

“The HMRC rules governing real estate SIPPs are more involved than those designed to accommodate different forms of title. It is therefore essential that existing or potential owners of real estate SIPPs are aware of the rules, which is why we believe it There is a significant demand among business owners for a clear explanation of their ownership options. “

By Lisa Bardell, Head of Business Partnerships at Options

Penny D. Jackson