PROPERTY

EASEMENT OF BORROWING

Given the current economic climate many SIPP members with commercial property investments may be experiencing difficulties. The Association of Member-Directed Pension Schemes (AMPS) has been in negotiations with HMRC regarding a number of issues including:

Restructuring borrowing / remortgaging

AMPS raised the issue regarding pre A-day borrowing in excess of 50% of the net asset value and the inability of the members to restructure or re-mortgage because this was deemed a new loan by the SIPP.

HMRC have agreed that provided the loan does not exceed the previous loan amount then restructuring and re-mortgaging will not be deemed a new loan and therefore the excess amount will not be a scheme chargeable payment.

Security / charging orders

AMPS raised the issue of schemes acquiring an interest in taxable property where such property has been used in respect of security for a loan or charging order and consequently an unauthorised payment is created.

HMRCs view is that an interest in taxable property would be created at the point a charging order is put in place, although they believe the unauthorised payment would be minimal.

This is unlikely to impact Suffolk Life's SIPP members as we do not allow our SIPPs to make loans.

Re-negotiating leases

AMPS raised the issue regarding property leased to a tenant connected to the SIPP member and re-negotiation of leases. It is commonplace for and sensible to renegotiate leases in adverse economic conditions but concern was expressed where the tenants are connected to the SIPP member. The concern was that the negotiation may not be seen to be arms length or fully commercial as there is a connection to the tenant.

HMRC have confirmed that re-negotiations may be allowed for connected tenants provided that they are conducted on the same basis as re-negotiations for unconnected tenants.

Miscellaneous points

HMRC have also indicated that they are open to further discussion with AMPS over these issues. They have already addressed some issues such as:

  • whether the borrowing re-structuring easement will apply to transfers between schemes; and
  • if HMRC would seek to apply charges in respect of past charging orders.