Under the final version of the Finance Bill, investors can now get exposure to residential property through their self-invested personal pensions (SIPPs) as long as it is through a so-called ‘genuinely diverse’ investment vehicle.
These schemes have to fit certain criteria: they must have at least ten investors and own at least three different properties worth a minimum of £1m in total.
A number of new schemes have emerged on the market to receive newly available SIPP money.
The new regulations give wealthy investors more of a chance actively to manage their own SIPP. Property syndicates allow individuals to get exposure to more opportunity-driven investments and access to local market expertise. These schemes can offer investors a clearer understanding of where their money will go and give more control over asset allocation.
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Property is considered a welcome diversification away from other assets such as equities, fixed-interest securities and bonds. Initially, the Government had planned to allow SIPP investors to buy properties – such as buy-to-let flats and holiday homes – but this was stamped out in a spectacular U-turn by the Chancellor before it ever got off the ground. The Government has allowed property syndicates, however, because they require investors to spread their risk while the strict rules mean that these schemes are only really viable for more sophisticated, higher-net-worth investors.
Investing in residential property through a SIPP can offer substantial tax advantages. Rental income is tax free, as is any capital gain made on the property. |
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Levels and bases of, and reliefs from, taxation are subject to change.
Quote source: Financial Times Media 28.07.06 |
