SIPPs in Spain: Buy Now, Say Pension Chief

Now is the ideal time to take a serious view on whether buying a second home in the UK, Spain or other sunbelt countries, according to Ian Rowe of Progress Financial Planning, specialists handling SIPPs (self-invested personal pensions) for millions of UK taxpayers.

Rowe confirms that second homes can be bought off-plan in the current tax year with the sale completed from 2006 onwards and that all tax advantages, including a Government contribution of up to 40% of the prices, will be available.

Progress Financial Planning is expecting a huge influx of SIPPs in the UK pensions market and SIPP providesr will be very busy coping with the demand. For the client who has decided that a SIPP will be an appropriate avenue for their property purchase, it would be advisable to set it up prior to April in order to prevent unnecessary delays in completion.

Rowe added that many clients use the benefits of buying off plan to reduce the cost of their property purchase in Spain and therefore increse the profit in resale. Providing the property does not have a habitation license or completion is extended beyond April next year; it is possible to place the property in a SIPP now.

Rowe stresses that it is also important that clients planning to maximize their pension provisions do not miss the opportunity of funding both the last and current years’ allowance to the pension fund. Many will miss that opportunity or feel it unnecessary because the succeeding year’s funding limit will cover the amount of the property purchase or the existing funds seem ample. It is important that the SIPP has enough liquidity to cover all charges such as conveyancing and rental agent fees.

Tax advantages in purchasing property via a SIPP include:

* Maximum tax breaks up to 40% of property cost

* Rental income will be free from UK income tax

* Sales profit will be free from UK capita gains tax

* SIPPs in Spain low cost mortgages

The second home and other assets can be passed onto dependents, where they are part of the same “family SIPP”. However, where there is no spouse there could be potential inheritance tax issues. Spanish banks are confident SIPPs in Spain are likely to have the same tax breaks although some local property and community taxes will still apply.

Posted on: Spain

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SIPPs in Spain: Buy Now, Say Pension Chief

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