Letting the building to an unconnected tenant is also an option, with the rent received going into the investor’s SIPP. This can deliver a longer term, stable rental income stream and with a good tenant in place comes an enhancement to the capital value of the property.
The final option is selling the building and investing in something else. Any gain made on the property from the renovation or development is free of capital gains tax within the SIPP.
In the case of The Lodge, the property value had increased by around £60,000. It is worth noting that trading within a SIPP is prohibited under HMRC guidelines and it is likely to view repeated property developments as trading, leading to the SIPP facing a hefty tax charge.
However, if the development work was conducted with the intention of holding the property as an investment and the disposal is a one off, HMRC is unlikely to be concerned.
Greg Kingston is head of marketing at Suffolk Life
