Buying a Woodland in a SIPP
A “SIPP” is a Self-Invested Personal Pension Scheme, which is in effect a way of putting money away for your retirement and additionally benefitting from that money not being liable for income tax. The government gives tax concessions on money put into pension products of this sort to encourage people to save for their retirement. SIPPs can be seen as “packages” which hold investments for when you draw a pension income. They have been regulated by the FSA since April 2007 and must meet certain requirements of the Inland Revenue (HMRC).
Generally, a SIPP is a pension savings device that allows you much more control over what your pension money is invested in. The SIPP can hold a wide range of assets including commercial or agricultural property and woodland/forestry property. There are, however, limits to the HMRC’s tolerance – residential property cannot be held directly in a SIPP.
Several people have recently bought woodlands from us in their SIPPs. Buyers need to get a valuation of the land to show that they are buying at or below the market value, and they will need to show that it is commercially managed. If you put your woodland into a Woodland Grant Scheme (administered by the Forestry Commission) you will want to use this to show that your woodland is being managed commercially. Tests of commerciality include: having a management plan which shows some commercial objectives; getting some advice from a professional manager, and it will help if you receive some income from timber or woodland products.
SIPPs are limited in what they can borrow and usually borrowing is limited to 50% of the fund’s value. Each SIPP has its own trustees and to set one up you will need an FSA regulated adviser, but the great advantage is that you have control over which assets are held within the scheme. There are now estimated to be about 250,000 SIPPs in operation in the UK.
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9 comments so far
Gavin Stoddart
26 February, 2009
If commercially managed woodlands are exempt from capital gains tax (which I understand that they are) what is the benefit of placing them in a SIPP?
MickGJ
27 February, 2009
Essentially you’re buying the wood out of gross income rather than net income so for a 40% tax payer a £30,000 wood would only cost them £18k of their disposable income. Ditto for any borrowing.
If this became common I would expect fairly stringent tests of commerciality from the taxman
Steve Seymour
20 March, 2009
I have a paid up AVC but I am still working. If I transfer the funds into a buying woodland through a SIPP and invest more funds into the SIPP as part of pension contributions. What happens to the ownership of the land on my death? At the moment the anuity rates offered are so poor I would need to live until I’m 95 before I would even get my stake back, and if I die after 2 years the insurance companies get the lot.
Rob C
23 March, 2009
Hi,
does anyone have any info regarding the release of funds from an existing pension fund to be able to use this to purchase woodland? I have spoken to pension advisor who explains can get the fund release to buy commercial property ie. office, light industrial unit etc. but has not heard of anyone having the fund re-invested in woodland, and was not able to advise on this.
thanks,
Rob
Dudley
14 August, 2009
Rob,
I am in exactly the same position. I want to release funds from an existing pension (which isn’t doing great) and transfer those funds to a SIPP that invests in woodland. Like you I want to find a financial adviser who understands what I am trying to do. Is there anyone out there who has done something similar and can give any advice?
thanks,
Dud
Lucas
12 May, 2010
Yes
Any luck on finding out how to transfer pension fund to sipp in a woodland. I have spoken to some advisors and they do not know of iots existance. Im sure there is, can I set up my own sipp as a trustee?
Lets see
Gary
9 July, 2010
I’ve been told by my SIPP provider (James Hay) that woodlands cannot be purchased by a SIPP. The reason: it needs a tenant and a regular annual income. Any thoughts on this?
Rob C
12 July, 2010
I was told by my adviser that I needed to show the woods could generate regular income, and to pay myself (or rather the SIPP fund) £100 a year for the sale of firewood, and this would be sufficient to get around the problem. Although I have still to put this into pracice, so they may find other problems yet.
Heather Dunne
3 September, 2010
I am an adviser specialising in pensions and work with numerous SIPP Providers. If any of you are still looking for help with regard to consolidating existing funds and specialist investments, do please get in touch – hdc.limited@btconnect.com