Client company set up a SIPP for sole director/shareholder. Co.made pension contribution and SIPP borrowed balance to buy offices at valuation.
Seller would not sell at the "fair valuation" so the company paid an extra £40k to seller to enable the sale to go through.
The questions are:
1. How to account for the payment made by the company, as it has no asset (the property is in the SIPP) and it does appear to be capital rather then revenue in nature. Our best idea so far is to treat it as some sort of pre-paid rent as the company will be paying less rent for the property after the purchase (the company occupies the office at present). We don't think any BIK issues arise as the SIPP has purchased the property at full valuation and the £40 has not gone into the SIPP.
2. How do we treat the payment for tax purposes?
Any creative ideas would be much appreciated.
Replies (8)
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Good point
...this is not some sort of backhander to the seller???
I am pre-supposing that it is properly documented as part of the property purchase consideration - which means that it will appear on the solicitor's completion statement.
Well it's a payment on behalf of the SIPP. It's either a pension contribution or a loan to the SIPP. I can't see that it can be anything else. Have you asked the trustees of the SIPP what it is?
Then as I said it's either a loan or a contribution and the trustees will be able to tell you which - and show you a copy of the loan agreement if it's a loan.
So....
...likely that the SIPP has a £300k asset with a £40k loan due to the company. The loan could then be cleared via another company pension contribution.