Geared Property Development in SIPPs

Geared Property Development in SIPPs

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A friend of mine who is not a client is experiencing the above problem. His lender has agreed to lend the money for him to develop a site for his business through his SIPP. The bank wants to retain control of stage payments for construction. The revenue have said that because the advance from the bank is conditional then it will not meet the rules and the deal is in jeopardy. The issue is that if it is not completed before A day then the loan to equity rules change to 50% and he will not be able to do it.

I have suggested that he explores with his adviser splitting the ownership of the project between himself and the SIPP, finding a way of getting the bank to relax the conditions and seeking another lender.

Has anyone got any other suggestions of a way to get round this?
Gordon Sheppard

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By MBK
09th Feb 2006 11:49

We have exactly the same problem...
with building a new office block for our practice.

We have spent ages trying to find a solution - and there isn't one.

A couple of points that have come up that may be relevant:-

1: Your man could, of course, make a large contb'n to his SIPP post A Day to complete the funding - but there are issues with this. Firstly, the £215,000 limit may not be enough and, secondly, the cash has to be there (or borrowable with independent security)
2: Our SIPP provider has no problem with part and part ownership between our SIPPs and us personally through an LLP - the only condition being that the bank cannot take as security the SIPP proportion to cover the non-SIPP lending. We went thorugh a lot of hoops with the precise form of joint ownership, and it appears that the only realistic possibility is a simple %age owned by the SIPP and outside the SIPP.
3: I understand that, now that residential property is not going to be permitted in SIPPs, the Revenue have agreed to "look again" at the borrowing restrictions. This message came back to me via a 3rd party who is in touch with one of the pensions consultative bodies.

Hope that is of some limited help. Happy to extend the discussion off forum via [email protected] if you wish.

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