Where SIPPS and SSAS are bought purely as a commercial property investment there is likely to be no connection between the landlord and the tenant. The relationship between the two is straightforward and easy to understand. In such circumstances, you are unlikely to fall foul of HMRC rules.
SIPPS and SSAS Explained
However, very often a business owner places their own office/shop/factory into their SIPPS/SSAS. At that point, the property is owned by the trustees of their pension fund rather than them as an individual. They then enter into a commercial lease, with their company becoming the tenants of the pension fund. Legally, there is a separate landlord and a separate tenant. However, on either side of the divide is the same person, but one wearing two different hats. In such circumstances, any transaction concerning the property involves connected parties. In order to avoid tax penalties that could easily wipe out the whole point of putting the property into this tax efficient vehicle, then any future transactions on that property need to be certified as being market value by a suitably qualified chartered surveyor. If they are not certified in this way they can be classified by HMRC as “unauthorised payments” and can attract a tax penalty of up to 70% of the unauthorised payment.
This requirement includes the need to get all the future rent reviews under the lease certified as being at market rent.
Here at CSD, we have considerable experience of doing SIPPS and SSAS valuations for both capital value and rent review purposes. It could also benefit you to discuss your property before you put it into a SIPPS or an SSAS as it may pay to do any development work or alterations before you put it into a scheme rather than afterwards – saving you the costs of incurring too many professional fees in a short period of time.
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Call CSD now to discuss your needs in this difficult area of tax planning and property ownership.
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