Case Study

SIPP Property Purchase

We were approached by the owner of a printing business that were renting their business premises and were looking to expand. The owner was aware of the ability to purchase commercial property through a Self-Invested Personal Pension (SIPP) and asked for us to look at the feasibility of this option for his business.

He had an existing personal pension that was being funded by contributions from the business. He identified a property that would meet the requirements of the business. The value of the property was less than the value of his existing personal pension so no borrowings were required to fund the property purchase through a SIPP.

After explaining the advantages and disadvantages of owning a property with a SIPP the client decided he would like to fund the business expansion by using his pension fund to purchase the new premises.

A SIPP was established and the funds from his personal pension were transferred into his SIPP bank account to fund the purchase. An independent rental valuation was carried out and the business now pay a monthly rental into his SIPP in addition to the ongoing monthly employer contribution. Both the rental payments from the company into the SIPP and the monthly pension contributions from the company are tax deductible. Any capital growth on the value of the property is exempt from capital gains tax as the property is held with a pension arrangement.

The client feels his money is working for him in a more efficient manner as his company is paying rent into his own pension fund rather than to a third party landlord. An investment portfolio was established within the SIPP for the investment of the monthly rental and employer pension contributions.