Emma Bunting is currently working for Stadia Trustees Limited who specialise in SIPPs.
The SIPP Trustees can borrow from a commercial lender to buy commercial property. The amount that can be borrowed is a maximum of 50% of the net asset value of the SIPP immediately prior to the borrowing and will take into account any existing borrowing. The borrowing limits are set by HMRC.
It is possible to purchase a property jointly between a number of individuals provided they all have SIPPs with the same provider. However, monies cannot be borrowed to lend to a connected Company.
It is possible for a SIPP to lend money to an unconnected third party. Up to 50% of the SIPP’s total funds can be loaned. The term of the loan may not be any longer than 5 years, although a loan can be rolled over once, subject to there being sufficient security i.e. first charge over assets which have greater than or equal value to the loan amount. Interest must be charged at a minimum of 1% above base rate rounded up to the nearest 0.25%. The loan must be repaid over the term. The repayments must include capital as well as interest.
If funds are released to a connected party, this is considered an unauthorised payment. There will be a tax charge of 40%. If the payment is over 25% of the fund assets a further charge will be incurred by way of a Scheme Payment charge. This will be a further 15%. This charge will be deducted from the pension fund. There will be additional charges as, amongst other things, the Trustees have to assess whether the www.stadiatrustees.com can make the loan, assess the security being offered, obtain valuations, and provide legal documentation for the loan agreement.
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