Claire Trott: A Budget boost for Sipps and SSASs


As a result of the continued stockmarket volatility, savvy investors have spent the past few months looking for stable assets to invest in for the long term.

Although it is true stockmarkets can be stable over the long term and looking at short-term volatility is not the way to think when investing for retirement, there is no doubt having a steady base can be very reassuring. To that end, direct commercial property has been attracting increasing attention of late.

The recent changes to residential stamp duty land tax have been welcomed by many and the announcement in the Budget to align this with commercial property has provided a bonus to those considering investing in such assets within their pension.

SDLT is payable by a pension when purchasing commercial property, which adds to the overall cost of the transaction. When calculating the amount of SDLT, you not only need to look at the value of the property or land but at the cost plus any VAT payable on it, even if the VAT can be reclaimed at a later date. Even in-specie contributions need to pay SDLT because there is a change of owner, which is the key trigger to the charge. Only when property is transferred between pension schemes is it exempt.

The big change to the way in which SDLT is charged on commercial property is the move from the threshold to tiered basis. When the charge was on a threshold basis, it meant that being only a few pence over it levied the higher tax charge on the entire amount.

This not only forced prices down for the seller but would put off a purchaser if the price was just above the threshold. Moving to a tiered approach means the increase is more gradual and applies only to the amount over each level. This makes any small increase in price less of an issue when looking at the overall cost of purchase.

New tiers versus old thresholds

The old thresholds meant there was no SDLT paid on properties costing less than £150,000 and this remains the same. However, whereas previously adding just a single pound would have meant a charge of £1,510, under the new regime this would only be 20p (2 per cent of the of the amount over £150,000). This difference varies as the amount increases because of the way the changes work.

Take, for example, someone with a property or land worth £249,999 (including VAT). The old charge would have been £2,500 bar 1p (1 per cent on the whole lot) but the new rates would be near to £2,000.

Tipping over into the next banding, you have another sudden drop in the amount payable. Previously, the whole amount where the cost was £250,000 and over was subject to 3 per cent but under the new rules only the extra over £250,000 is subject to the new charge of 5 per cent.

This will mean for higher-value properties the SDLT will be higher but this was expected as the Budget was about helping smaller companies, not big businesses.

And this will indeed be a real boost to the smaller companies looking to invest with their pension fund, as well as directly. In many cases, the directors of these types of companies have pension funds built up from previous employments and it is great they will have more of this to use towards building their business. The old saying “my business is my pension” or “my property is my pension” has never been more true.

Claire Trott is head of pensions technical at Talbot and Muir