Development of property

Properties held within a SIPP or a SSAS may need improvements from time to time to keep them up to date or more substantial development work may be conducted to improve their rental/capital value.

Both ongoing maintenance and more substantial work such as structural improvements can be paid for using the SIPP/SSAS funds or through borrowing, provided they are of benefit to the SIPP/SSAS in the long run.

If you decide to develop the property held within the SIPP/SSAS, the normal planning permissions must be obtained.  For the development of an existing commercial property this shouldn’t be an issue.  But, if there is a change of use from a commercial property into a residential property, then the trustees must obtain consent for that change from the Local Planning Authority.

Once change of use and planning permission has been obtained it can seem complex to develop the property and there are a number of considerations:

• It is important that HMRC does not feel that the SIPP/SSAS is ‘trading’ by buying property, developing it and then selling it. If they deem this to be the case then there may be a tax charge on profits and income arising.
• If the work is to be carried out by your own firm or a connected party, then it is important to obtain a number of comparable quotes to evidence that it is a fair price for the work carried out
• A SIPP cannot hold residential property, and so during the development cycle, it must be disposed of prior to it becoming habitable and receives a habitation certificate

We are well placed to guide you through this complex process so please speak with our Adviser Support Team in the first instance with any queries.