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The costs of buying a property with a SIPP

It is possible to use your Self-Invested Pension Plan (SIPP) to purchase a property. However you must bear in mind that there are costs involved in buying property using your SIPP, all of which have to be paid by the SIPP itself.

These include;

• Surveyor's fees (including any environmental surveys)
• Solicitor's fees
• Searches
• Stamp duty
• VAT - if applicable. Some properties are registered for VAT, some aren't. If VAT is paid, the pension can reclaim it from Customs & Excise if it itself is VAT registered. If it does register for VAT then the pension must then charge VAT on the rent from the tenant and also on the sale price, if the property is later sold on
• Pension provider's charges
• Adviser's fees
• Property management charges
• Mortgage arrangement fees
• Connected transactions

Before 6th April 2006, otherwise known as A-day, a pension scheme couldn't purchase a property from, or sell it to;
• The SIPP policyholder or a close relative of the SIPP policyholder
• A partnership, if the SIPP policyholder or a close relative is a partner
• A company controlled by the SIPP policyholder or a close relative
• Fellow directors or influential shareholders

The regulations also stated that a pension scheme couldn't purchase property from an unconnected party if it had been owned by any of the parties listed above within the previous three years.

Tenants could be connected, but all transactions had to continue to be dealt with on commercial terms. This includes levels of rent, treatment of rent arrears, and the terms of the lease and the enforcement of it.

But now, these restrictions on transacting between pension schemes and connected parties have been mostly removed. This allows SIPPs to deal with connected parties, including the SIPP policyholder to buy, sell, or lease property.

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