| The start of
the 2006/2007 tax year sees substantial changes in
the UK’s pension legislation.
This will give anyone the opportunity
to buy an overseas property by means of a SIPP and
gain tax relief. Experts predict the number of registered
schemes to rise from about a hundred and twenty thousand
to several millions. A large proportion of these new
schemes will be invested in foreign properties, the
smart money being on Cyprus.
What is more, you can take advantage of the forthcoming
changes now.
Current UK legislation permits you to buy an off-plan
property now and complete the purchase through your
SIPP after the new regulations come into force. The
property will then be transferred to your personal
scheme at the initial purchase price.
Here’s how it works.
The new laws cover the purchase of residential properties.
If you buy an off-plan property in Cyprus in your own
name now, it is not classed as a residential property,
as it has not been completed (providing of course that
it will not be finished prior to the start of the new
tax year.
Once the new legislation comes into force, the property
is then transferred to your SIPP.
It is worth noting that your off-plan purchase contract
will require a clause permitting the resale of your
property prior to being completed. We can advise you
further on this and make arrangements as necessary.
Full UK income tax relief on the purchase price of
the property is available through Self Invested Personal
Pension schemes. Furthermore, any rental income derived
from your investment will be added to the value of
your pension scheme tax-free.
Also, unlike Spain, which has no trust laws in place
covering these schemes, Cyprus law, which closely resembles
its UK counterpart, allows you to purchase through
a SIPP scheme
The pension fund is also able to borrow in order to
invest, enabling buyers to purchase holiday homes which
they would be unable to otherwise.
Currently, a S.I.P.P. is able to borrow up to 50% of
its value.
For instance, if the value of your fund is £52,000,
an additional £26,000 may be borrowed against
it bringing its value to £78,000.
Under the new legislation, the investor receives tax
relief of least 22p for every 78p contributed.
With these additional ‘tax breaks’ your
fund is able to buy a piece of real estate valued at £100,000.
Investors in higher tax brackets are entitled to 40p
tax benefits for every 60p contributed.
Thus, an investor paying a higher rate of income tax
would only have to in vest £40,000 to obtain
the same purchasing power for their fund.
(£40,000 + £20,000 borrowed + £40,000
tax relief = £100,000)
Please click
here to return to the main SIPPs page. Please click below for information on:
Although every care has been taken to ensure the accuracy
of this information, Aphrodite Property Sales can take
no responsibility for actions taken based on the content
of this page.
E&OE
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