HOW TO BUY - Target Markets- Global Property Investment

as holiday resort hotel rooms and lodges where a
‘commercial use’ designation has been attained.
There are two very important points to make
here: fi rstly, regardless of having a ‘commercial’
designation, HMRC do not allow any personal use
of property (or any other items) that have been
bought through a SIPP. Basically, you may own the
hotel room or lodge (in our example) but you can’t
actually stay in it! Well, not without paying full price
to the operator for doing so.
So such a purchase should be seen as an
investment only with the terms of the purchase being,
perhaps, a leaseback of your property to the resort
owner who will pay you a portion of the income they
receive from renting the room out on your behalf.
This can then be paid tax-free back into your SIPP.
With the oversupply of leisure-oriented property
from the boom years in places such as Spain, Cyprus
and Florida, it is primarily property developers and
their agents who are promoting such SIPP-based
investment leaseback schemes.
Is something really SIPP compliant?
This brings us to our second important point:
not all property advertised as ‘SIPP compliant’ by
property developers, agents and other promoters
can actually be held in a SIPP.
The reason for this is that it is not enough that a
30 AIPP CONSUMER GUIDE
3 ESSENTIAL SERVICES
developer believes his project/investment proposition
complies with the qualifying terms set out by HMRC.
It is for the SIPP Provider (who is co-trustee with you
of your SIPP) to accept the scheme after their own
thorough review – a due-diligence process designed
to protect you and the SIPP Provider.
After all, you do not want an asset/income you
own in a foreign country to go awry with the potential
loss of your income or, in the worst-case scenario,
your property.
The best way to test the veracity of a ‘SIPP
compliant’ property investment is to ask for evidence
of which (UK) SIPP Providers have accepted the
scheme – the more the better.
So if you are keen on pursuing a leisure property
purchase for investment purposes through your
pension it is certainly possible to do so. You can
create your own ‘investment fund’ by setting up a
SIPP and by paying in new money or transferring
some or all of your existing pension arrangements
into it, which you then control.
That said, such a move should not be undertaken
lightly and should only happen after receiving advice
from a qualifi ed pension professional duly registered
with the FSA as having permission to give such advice.
Moving a pension scheme out of your current
arrangements could seriously disadvantage you
and a SIPP will certainly not suit everyone.