Thursday, 23 August 2012

GPs - transferring the surgery premises to a SIPP

Under the simplified tax regime for pensions that came into effect on 'A-Day' (6 April 2006), GPs can secure valuable tax relief advantages by placing surgery premises that they own into a self-invested pension plan (SIPP).
Before A-Day, people were prohibited from putting commercial property into a SIPP. Now, because the rules have been relaxed, GPs can benefit from tax relief at the highest rate of tax they pay on the value of surgery property - or share in it - that they transfer into a SIPP.
Any growth in the value of the property while it is in the SIPP is tax-free. The GPs occupying the property (or property share) are entitled to tax relief - again at the highest rate they are liable for - on any rent they pay on the property. The rent counts as a tax-free contribution to the SIPP.
While you can instruct the SIPP to sell the surgery (or your share) at any time, you will not be able to get your hands on the proceeds until you are 55.
Not all GP owner-occupiers will be able to take advantage of SIPPs. For one thing, the situation can be complicated by partnership shares and borrowings secured on the property. Specialist SIPP providers and financial advisers can assist in the more complicated cases.
The transfer to the SIPP is an investment decision and as such should only be made if you fully understand the implications. Expert advice from an IFA is essential.
Bear in mind that because of the rise in their NHS earnings since the new contract to an average (and I stress the word average) of £112,000, it is likely that the value of GPs' accumulated NHS pension funds will show significant rises over the next few years. There is some capping of pensionable income to bear in mind and many complications such as the purchase of additional years to take into account.
So you need to consider whether transferring the surgery premises to a SIPP will result in the total value of all your pensions exceeding the new lifetime allowance, currently £1.5 million pounds for 2011/12. A hefty rate of tax rate of 55% is slapped on any excess.
This sounds a lot but the factor applied to Doctors pensions is 20x pension.  Add the lump sum.  Add any private provision and for many doctors, consultants and dentists a pension pot of £1.5m on retirement is quite possible.
Some intriguing tax planning is possible with doctors pension contributions.  Self employed GPs can elect to have their employer pension contributions paid into a private pension.  This has obvious advantages but some disadvantages too.  Pension contributions are a regulated area and expert advice from a qualified professional is essential. I stress advice from an IFA should always be sought before any change to existing arrangements is made. 

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