New schemes allowing pension investors to invest in holiday properties via share ownership in companies that own the holiday lets have been described as “toxic”with some self-invested personal pension (Sipp) administrators refusing to allow these assets to be held.
Currently, investors are not permitted to hold direct investments in holiday lets or cottages within a Sipp, as these bricks-and-mortar assets are considered residential, rather than commercial property – and only commercial property is an authorised pension investment.
Holding these shares in Sipps enables investors to benefit from dividends and tax-free growth but many Sipp administrators remain nervous about these schemes – largely due to concerns that the underlying assets could be regarded by HM Revenue & Customs as residential property, and as such expose a Sipp to a large tax charge.
The current regulations state that no single shareholder in the company owning the holiday lets is allowed to hold 10 per cent or more of the share capital, or the voting rights, of the company this proves very difficult for the Sipp administrators to monitor and as such in many cases the administrators refuse to accept the shares into the Sipp but the ones that do are potentially putting the Sipp at risk if they don’t closely monitor the investment.
Another area the Sipp trustees have to consider is ensuring that the member remains detached from the asset, they should not gain any rights to stay at, or use, the holiday complex through having made that investment but a Sipp member is still able to book and stay at the resort on a normal commercial booking basis.
So the warning is if you flout the spirit of the rules then don’t be surprised if the Revenue at some point disallow your investment and you are faced with a large tax bill.
All Investment Property Worldwide alternative investments are fully Sippable and comply with all the current regulations regarding Sipp investment –
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