Broken Promise - SIPPs – Investment in Residential Property is disallowed.
In his November 2005 Pre Budget announcement Chancellor Gordon Brown made an unexpected U-turn and the Financial Services industry has been deprived of a massive windfall.
Mr Brown announced that investors in “self-directed” SIPPS and SAS’s will not be allowed any tax advantages from 6th April 2006 if they invest in “prohibited assets” which he has named as residential properties, holiday homes, fine wines, classic cars and art and antiques.
According to Chancellor Brown investing in the “wrong type” of asset is now officially classed as tax avoidance – though as he proposed the changes, which would have allowed this type of investment, I can’t see why or when it changed from being acceptable to being illegal! Anyway, the pension rules on “A” Day have been modified and investment in residential property, either directly or indirectly (such as investing in shares in a residential property company) is now prohibited. However, investment will be allowed if the property is held by genuinely diverse commercial vehicles of the type that the Chancellor is trying to promote, for example Real Estate Investments Trusts.
This change means that it is now less advantageous to hold these prohibited assets in a pensions scheme than it is to hold them personally. This is all pretty dire news for investors who were planning to buy residential property off-plan and transfer it into a SIPP after 6th April 2006. But that doesn’t make property investment any less attractive.
NOW IS A GOOD TIME TO INVEST IN PROPERTY
Following this about turn all the developers that I spoke to reported a slowing down of sales particularly in developments due to complete before April 2006 but also ones due to complete during the rest of 2006 and 2007. They put this down to the effects of people waiting until after 6th April. However since then things have been getting better but this is still a slack time for developers and it costs them money to keep unsold property vacant – so you can benefit from some good deals!
House prices continued to rise during 2006 and are still expected go up during 2007, despite two interest rate rises late in 2006.
Over the next few weeks I will be preparing details of some excellent property deals and will post these on my website http://www.jamesgreenandco.co.uk/view_properties_for_sale.htm but if you would like advance information including some very limited deals, then click on the following link and send me a message advance info please and if you want you can give me any details of areas or types of property you are especially interested in.
In the meantime please do contact me if you have any questions or queries in general.
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