Acquiring commercial property through a SIPP is one of the most astute, tax-efficient investments an individual can make, says Lisa Bardell, business partnership manager at Options.
In short, the SIPP owner receives rental income from the property tax-free and incurs no CGT liability when the property is eventually sold.
Yet while there is no requirement for the SIPP owner to operate any form of commercial enterprise of their own to receive these benefits, the advantages to business owners multiply when they acquire their own commercial premises using a SIPP and effectively become a tenant in their own property.
In this instance, the owner's business pays a regular market rent to the SIPP; this reduces the member company's taxable income, freeing-up capital for investment.
Second, as we have already noted, the rent paid by the business accumulates tax-free within the SIPP, income that could be used to invest in other asset classes.
In addition, both the SIPP holder and the business benefit from enhanced stability. The business has a stable landlord who has no intention of selling, while the landlord benefits from having a stable tenant who can be relied upon to pay the rent.
But isn't this an odd time to be trumpeting the benefits of commercial property investment?
Not so claims Lisa Bardell (pictured), Business Partnership Manager at Options UK, the independent, regulated SIPP and corporate pensions provider, who has witnessed a steady flow of SIPP-related property purchases over the past 12 months.
"There have been a number of encouraging signs within the commercial property sector since the start of the year," notes Bardell. "For example, we are receiving more enquires, and the transaction prices are less inflated than were previously, which enables easier negotiation," she adds.
The market has been described as being ‘quietly buoyant'. In August, Savills reported that commercial property investment values had risen by £31.4 billion to the end of July, a 32% increase on the same period last year. The following month, Colliers published a paper forecasting 9% growth in commercial property values for the whole of 2021.
"Many of our clients already recognise this latent buoyancy," says Ms Bardell, "but we feel that the advantages of using a SIPP with which to buy commercial property is a process that deserves to be broadcast to a wider audience."
The Milton Keynes-based firm are taking the bull by the horns and launching a multi-media campaign, including a series of jargon-free papers and articles, called What Are Your Options? designed specifically for individuals who wish to buy commercial property either through their SIPP or in conjunction with others as part of a partnership / syndicate.
Among the topics scheduled to be covered by What Are Your Options are features on:
- The tax benefits and important intangible advantages available to property SIPP investors.
- Leverage: how SIPPs can use relatively low-cost mortgages to buy commercial property.
- How SIPP property partnerships / syndicates work.
- HMRC rules for owner / occupier SIPPs
- Property SIPP administration: lease renewals, VAT registration and related matters.
- Can my business buy more than one commercial property?
- Retail parks to distribution centres: property SIPPs for the online age.
Bardell, who heads up the development of Options UK SIPP-related commercial property solutions, feels it is important that business owners considering or planning to acquire their premises using their SIPP "Understand the difference between SIPPs created specifically for this purpose and one designed solely to comprise a range of other standard regulated asset classes.
"HMRC rules governing property SIPPs are more involved than those designed to accommodate different form of securities. It is vital, therefore, that existing or prospective owners of property SIPPs are au fait with the rules, which is why we believe there is significant demand among business owners for a clear explanation of their property options."
By Lisa Bardell, business partnership manager at Options