SIPP questions

2) Yes, you would be liable for the CGT in the usual way, on entry into the SIPP. And the SIPP would have to bear the legal fees, stamp duty, etc....

However, if the SIPP then sells the property, it will be free from CGT.

However, the main question you should ask yourself is, do you currently have a pension plan or pension funds that are of sufficient value to purchase a property.

Currently a SIPP can borrow up to 75% of the value of a commercial property. However, after 2006, it falls to 50% of the SIPP PENSION FUND, and you can purchase both commercial and residential property.

Therefore, assuming you want to put a property worth £200,000 into a SIPP.

You will need a pension fund worth either £200,000 or a fund worth c. £140,000 which can borrow the remainder....

You won't be able to just throw properties into a SIPP and escape the usual taxes.

I suspect that most people who have gone down the buy-to-let route in the past will not be able to do this, as they have neglected building up pension funds in favour of buying property.

Therefore, assuming you want to put a property worth 200,000 into a SIPP.

You will need a pension fund worth either 200,000 or a fund worth c.

AFAIK if the property you own is worth no more than the amount you are allowed to invest into a personal pension - i.e. 100% of your earnings next year - then you can transfer it into the SIPP as an annual contribution. This the OP's first point (sell or transfer).

Rob Graham

But presumably only if mortgage free?

OTOH the other Tax statii of the house will be the same. I.e. transferring will generate a CGT liability at current value and full stamp duty and Land registry will still be payable on the transferred value (neither of which will be valid deductions for the CGT calculation).

tim

Some of the legal fees are personal expenses in the same way as they would be if it had been sold to an unconnected third party.

The property *must* be managed by (or on behalf of) the SIPP provider. It can no longer be managed by the original owner and he certainly shouldn't "collect the rent by hand".

tim

I doubt many people have the ability to contribute 100% of their salary in any given year. Unless they have lots of savings.

These SIPP changes are getting well over-hyped.

No, I agree. However, the OP's first point asked whether you could transfer and this is how it *could* happen.

Rob

OK, I never really thought about moving a property 'in specie' into a pension fund as an alternative to making a monetary contribution, but yes, you are right, and it probably will be possible.

How this will work in practise come April 2006 is another matter.

I guess the property will have need an independent valuation, but I'm just wondering how tax relief will be given if the contribution is a property - 22% or 40% of the valuation ?

It seems to me that if you have a house valued at 100,000 and move it into your SIPP then the SIPP provider will get 28,205 from the Revenue on your behalf. Thus you will effectively have made a contribution of 128,205 and will need an income of that amount to justify it. You will also get a reduction in your tax bill of 23,077.

Rob

OK so far, the 28205 being 22% of 128205.

But surely this is only the case if he had in fact paid 40% tax on all of the above £128,205, and if he therefore has other income which is at least equal to the threshold.

If £128,205 was his only income, then surely he would get 22% of all of it into the SIPP, plus cash equal to 18% of only that part of the

It strikes me that there can't be many people whose annual after-tax income is at least equal to the value of a house they own. This raises the question of whether it's possible to transfer houses into a SIPP in instalments. You know, add something like a 20% share one year, another 20% the following year, and so on.

Yes, true. I wasn't accurate enough.

Although I don't know the answer to this, it would seem reasonable to expect that if one owned a property as a tenant-in-common with one's SIPP (having transferred say half the value in one year), you could transfer the other half the next year.

Rob

That is a very interesting proposition, and one I'm going to try and get to the bottom of.

Rob graham wrote:

X-No-Archive: yes

In message , sylvian stone writes

Try getting your posts to the bottom first. It's quite simple.

Possible in theory. But your SIPP provider would have to agree - which might be unlikely. How you would deal with only part of a property?

Can't you hand over management of 100% of the property to the same management company whilst still retaining a beneficial interest in part of it?

tim

Well, there are several commercial property SIPP arrangements where individuals own a percentage of a large building - and they their rental income, loan liabilities, etc, are split in exactly the same percentage.

AFAIK, that is a different scenario - one SIPP owner with sub-funds?

Could this be accomodated if a SIPP was segmented ?

Or am I really going off on a tangent ?