City Trustees - part of Mattioli Woods

News and Media

10 October 2013

Budget update 2013 - residential property investments

You may recall in our article dated 22 March 2013 that we wrote about the Chancellor of the Exchequer's (George Osborne's) announcement in the 2013 Budget, which revealed that the Government was considering a relaxation of the rules to allow unused commercial property to be converted to residential use within a small self-administered scheme (SSAS) or a self-invested personal pension (SIPP).

Following a review of this proposal, the government has now decided not to make any changes to the existing rules applying to residential property investments within a pension scheme at this time.

The Government's findings were that the costs of complicating the tax code, and the risk of reduced tax receipts that would result from changes to the tax rules at a time when the Government is looking to reduce the deficit, outweigh the benefits to be derived from such changes.

Whilst we previously welcomed the proposals and the rationale behind permitted residential property investments, we did so with caution, as this was not the first time permitting residential property investment within a SSAS or a SIPP had been considered by the government of the day.

In 2005, the draft version of 'New Labour's' radical pension changes stated that residential property was to be a permitted asset within a SSAS or a SIPP. The current coalition government has now decided against permitting residential property investments within a SSAS or a SIPP without attracting tax penalties.

However disappointing, this should not detract from the existing position. Properties which could be purchased through a SSAS or a SIPP include commercial property and land, as well as residential property which has reached the point of becoming suitable for use as a dwelling. These include hotels (although there are specific rules regarding rooms), care homes, residential properties with commercial use, such as a shop with a flat above (unconnected manager of shop only to occupy the flat), halls of residence and prisons.


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