sipp

Property - in specie contribution

Four of our members are equal partners in a Surveying firm. The firm had owned its city-centre offices, which had an open market value of £360,000.

On the advice of their financial adviser, the partners decided to use these premises as an ‘in specie’ contribution to their @sipp plans. As each partner owned 25% of the property, a net ‘in specie’ contribution of £90,000 was made to each SIPP.

We could then claim basic rate tax relief on this contribution for each member; £22,500 for each SIPP. And, because each partner has taxable earnings of more than £115,00 – hence higher rate tax payers – they could also claim a further £22,500 through their self-assessment forms.

This means that each of the four partners received a pension contribution of £112,500 while cutting their tax bill by £22,500.

The rent on the property is now paid into their @sipp plans – free of income tax and, together with the cash from the tax relief, is available for investment.

And, if they decide to sell the premises, any capital gain made by selling the property is protected from Capital Gains Tax.

Please note:
HMRC deem the ‘in specie’ contribution as a sale and purchase.
Any capital gain at the time of making the contribution needs to be paid.
Care must be taken to ensure any in-specie contributions satisfy HMRC’s requirements. We, therefore, strongly recommend anyone considering an in-specie contribution consults their financial advisor in advance.