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Reply From Edd Balls On Btl Sipps Loophole

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Guest Riser

I have just had a reply from Edd Balls via my MP regarding a request for clarification I made about a potential loophole in the new finance bill that would enable BTL investors to continue to invest residential property in SIPPS despite Gordon Browns assurance in the house of commons that residential property would be exempt.

Reports of the loophole were first highlighted here on HPC and on Firstrung.com

First time buyers abandoned as pension funds can continue to SIPP at the poisoned chalice

I have read the reply and it would appear to me that it merely confirms that providing ‘certain conditions’ are met it will be possible for BTL investors to club together and form a syndicate to hold residential property in a SIPP. Any comments would be welcome as my MP would be ‘most interested’ to here my comments on the Edd Balls reply.

....Your constituent asks about the criteria required for buy-to-let investors to put residential properties into self-invested personal pensions (SIPPs). These will be affected by measures in the current Finance Bill.

Where the SIPP, and associates, own residential properties indirectly through a pension vehicle, the Finance Bill measure means that, unless they meet certain conditions, there will potentially be income tax charges in respect of the SIPP investments. One of these conditions is, as you mention, that the total value of the assets held directly by the vehicle is at least £1 million, or that the vehicle holds directly at least three assets which are residential property. However, the measure also requires that, in either of these cases, no single taxable property held directly by the vehicle has a value which exceeds 40 per cent of the total value of the assets the vehicle holds directly. Secondly, the investment in the vehicle must not be made for the purpose of enabling a member of the SIPP, or any person connected with such a member, to use or occupy the property. Thirdly, the SIPP and associates must together own less than 10 per cent of the vehicle.

Where the SIPP owns residential property directly, rather than indirectly, the Finance Bill measure means that there are potentially income tax charges in respect of that investment in property. Direct ownership of a less than 10 per cent interest in the property would not prevent the income tax charges arising; nor would the fact that the property was not acquired for personal use. A "syndicate" arrangement, under which the SIPP owns a share of a residential property directly, would not therefore prevent the tax charges arising, even if its share were less than 10 percent.

HM Revenue & Customs (HMRC) published draft guidance on pension schemes and taxable property on 7 April. This guidance is available on their website at:

www.hmrc.gov.uk/pensionschemes/taxable-property-guidance.htm#l

Paragraphs 10 and 11 contain information regarding direct holdings; indirect investments are covered in paragraph 17. Paragraph 17 also lays out in detail the categories of diverse commercial vehicles and the conditions they must meet so that they are not subject to tax charges when they are held as a scheme investment by an investment-regulated pension scheme.

Please pass on my thanks to your constituent for taking the trouble to make me aware of these concerns.

Yours sincerely

ED BALL MP

Edited by Riser

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I have just had a reply from Edd Balls via my MP regarding a request for clarification I made about a potential loophole in the new finance bill that would enable BTL investors to continue to invest in SIPPS despite Gordon Browns assurance in the house of commons that residential property would be exempt.

Reports of the loophole were first highlighted here on HPC and on Firstrung.com

First time buyers abandoned as pension funds can continue to SIPP at the poisoned chalice

I have read the reply and it would appear to me that it merely confirms that providing ‘certain conditions’ are met it will be possible for BTL investors to club together and form a syndicate to hold residential property in a SIPP. Any comments would be welcome as my MP would be ‘most interested’ to here my comments on the Edd Balls reply.

I think the complexity will put most people off. Would you want to have your property tied up in red tape and dependent upon the cooperation of syndicate members?

As TTRTR will confirm, most property investors want to be able to pass their wealth onto their children. With a pension it disappears in a puff of smoke when you die.

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Guest muttley

As TTRTR will confirm, most property investors want to be able to pass their wealth onto their children. With a pension it disappears in a puff of smoke when you die.

I thought that you could pass a SIPP on to your children. Subject to IHT.

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Guest Riser

I think the complexity will put most people off. Would you want to have your property tied up in red tape and dependent upon the cooperation of syndicate members?

As TTRTR will confirm, most property investors want to be able to pass their wealth onto their children. With a pension it disappears in a puff of smoke when you die.

The complexity would be worth it if you could effectively get 40% off the purchase price of property you purchase through your BTL SIPPS syndicate.

SIPPS may actually provide an effective way of reducing your inheretance tax liability

I suspect many BTL investors are lying low hoping the legislation will go through unchallenged with this massive loophole intact.

http://www.pensionsorter.co.uk/getting_sip...tml#inheritance

Can it help me avoid inheritance tax?

The short answer is yes.

If a person dies before withdrawing assets from their fund, members of their family could be able to inherit without payment of inheritance tax.

Again, this is a potentially significant saving, although exactly how much remains a grey area because it is unclear how the Inland Revenue will treat such inheritances.

It might come down to a judgement by the Revenue of the 'intent' of the Sipp fund holder - if the Revenue judges that investment in a Sipp was designed to avoid inheritance tax, then it could decide to impose a levy itself.

The best idea for anyone considering using a Sipp to avoid inheritance tax is to take professional advice at the time that will take account of that person's individual circumstances.

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Guest Riser

Sorry, I think I'm talking crap. :lol:

The point is was Gordon Brown talking crap in the house of commons when he said residential property would be excempt from SIPPS

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Of course, Brown needs to prop up the market by any means possible if he's to do some relocation of his own. However, he needs to be seen not be royally screwing over FTB'ers.

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Guest Riser

Which party is your MP from?

Lib Dem

Has anyone seen any websites or companies offering BTL investors the opportunity of forming syndicates to exploit this SIPPS loophole.

How can Brown claim to be concerned about affordable housing and FTBs when he is prepared to let BTL investors use a back door method to buy at discounted prices and possibly avoid inheretance tax by invesing residential properties in SIPPS.

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Lib Dem

Has anyone seen any websites or companies offering BTL investors the opportunity of forming syndicates to exploit this SIPPS loophole.

REIT's will formalise this anyway, it's all left hanging out on show if you look close enough.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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