For those of you interested in purchasing a property through a self-invested personal pension (SIPP) or small self-administered scheme (SSAS), there are a number of key points which you need to know. Whilst the conveyancing process is similar in many respects to a ‘standard’ property purchase, by dealing with these points at the start, it will help to ensure that your pension provider and solicitor can work together to achieve a quick and smooth transaction:
1. No residential property!
This is the number 1 point to check when looking to transfer a property to a SIPP or SSAS. Generally speaking, SIPPs and SSASs should not directly own residential property. There are a few exceptions, for example, if you have a commercial property with a live-in caretaker, but if you come across this you should check with your pension provider and solicitor before proceeding. An investment in residential property can lead to a tax charge of 40% plus a charge on any capital gains. It is also worth speaking to us if you are looking to transfer a commercial unit with residential living space above it, as there are ways of transferring just the commercial elements in order to comply with the pension scheme tax requirements.
2. Market value
If the property is being transferred to the SIPP or SSAS from a ‘connected person’ (for example the beneficiary of the SIPP), then the transfer must be done at open market value or tax charges could be imposed. The same applies if the property is going to be rented to a connected company post-completion and so it is important to obtain a valuation early on in the process.
3. No contaminated land!
Whilst contaminated land is something most parties try to avoid buying, SIPPs and SSASs will be particularly careful to avoid investing in this. Pension providers will often carry out an environmental desktop survey on the property at the start of a transaction to see if there are any concerns regarding contamination. If the survey does reveal the possibility that the land is contaminated, then the pension provider may look to carry out further enquiries and investigations before allowing you to proceed with the purchase. Again, to prevent delays in the transfer of the property, the earlier this can be done in the process, the better.
If any issues are raised during the above processes, it doesn’t necessarily mean the end of your transaction, but it is certainly advantageous to all involved to deal with these points as early on in the process as possible.