3 ESSENTIAL SERVICES
as holiday resort hotel rooms and lodges where a ‘commercial use’ designation has been attained. There are two very important points to make
here: fi rstly, regardless of having a ‘commercial’ designation, HMRC do not allow any personal use of property (or any other items) that have been bought through a SIPP
. Basically, you may own the
hotel room or lodge (in our example) but you can’t actually stay in it! Well, not without paying full price to the operator for doing so.
So such a purchase should be seen as an
investment only with the terms of the purchase being, perhaps, a leaseback of your property to the resort owner who will pay you a portion of the income they receive from renting the room out on your behalf. This can then be paid tax-free back into your SIPP
.
With the oversupply of leisure-oriented property from the boom years in places such as Spain, Cyprus and Florida, it is primarily property developers and their agents who are promoting such SIPP-based investment leaseback schemes.
Is something really SIPP compliant? This brings us to our second important point: not all property advertised as ‘SIPP compliant’ by property developers, agents and other promoters can actually be held in a SIPP
. The reason for this is that it is not enough that a
developer believes his project/investment proposition complies with the qualifying terms set out by HMRC. It is for the SIPP Provider (who is co-trustee with you of your SIPP) to accept the scheme after their own thorough review – a due-diligence process designed to protect you and the SIPP Provider. After all, you do not want an asset/income you own in a foreign country to go awry with the potential loss of your income or, in the worst-case scenario, your property. The best way to test the veracity of a ‘SIPP compliant’ property investment is to ask for evidence of which (UK) SIPP Providers have accepted the scheme – the more the better. So if you are keen on pursuing a leisure property purchase for investment purposes through your pension it is certainly possible to do so. You can create your own ‘investment fund’ by setting up a SIPP and by paying in new money or transferring some or all of your existing pension arrangements into it, which you then control. That said, such a move should not be undertaken lightly and should only happen after receiving advice from a qualifi ed pension professional duly registered with the FSA as having permission to give such advice. Moving a pension scheme out of your current
arrangements could seriously disadvantage you and a SIPP will certainly not suit everyone.
AIPP CONSUMER GUIDE 43
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