Most of the transitional protection rules were set out in a
technical note issued on the day of the 2005 pre budget report (5th
December 2005). The table below sets out the announcement that was
made at that time and sets out the transitional provisions by
reference to different scheme types.
Clarification and guidance on the pre 6 April 2006 pension
rules can be found at
http://www.hmrc.gov.uk/pensionschemes/former-regime.htm#2
| Type of scheme and investment | Will it be transitionally protected |
| Self-invested personal pensions (SIPPS) and Small self-administered schemes (SSAS) – direct investment in residential property | No – if the
purchase is not allowed under the pre A Day rules.
Certain narrow classes of investments in residential property are allowed under pre 6 April 2006 rules and these will be protected where they are purchased before 6 April 2006, provided they are not materially improved (unless for a statutory requirement) on or after that date. These include investments in ground rents, feu duties and property related to an employment for an employee unconnected with the pension scheme. |
| SIPPS and SSAS – off-plan purchases (or property that is not fit for use as residential property) | If investment was made
before midnight on PBR day and the off-plan investment does not
become residential property after PBR day, it will be protected.
There will be no protection for any off-plan purchases made after PBR Day. |
| SIPPS and SSAS – indirect investment in residential property or where property purchased directly under the pre-1991 rules for SSAS. | Where an indirect
investment is made before midnight on PBR and that investment is
not explicitly prohibited under the current regime, the investment
will be protected, provided it is not materially improved (unless
for a statutory requirement) from that date. There will be no
protection if there is any post-PBR material improvement
expenditure (unless for a statutory requirement).
Where a property was purchased by a SSAS under the pre 1991 rules the investment will be protected, provided it is not materially improved (unless for a statutory requirement) after midnight on PBR day. There will be no protection if there is any post-PBR material improvement expenditure (unless for a statutory requirement). There will be no protection if the indirect investment is not allowed under the current regime. |
| Personal Pension Schemes | To the extent these are covered by the new legislation the treatment will be exactly as for SIPPS and SSAS. |
| Retirement Annuity Contracts – direct and indirect investment in residential property | All purchases of residential property made before 6 April 2006 will be protected, provided they are not materially improved (unless for a statutory requirement) on or after 6 April 2006. |
| Small Schemes approved under the mandatory provisions of section 590 of ICTA 1988 – direct and indirect investment in residential property | All purchases of
residential property made before 6 April 2006, by one of these
schemes which was set up and approval was granted before midnight
on PBR day, will be excluded from the scope of the action where
they are purchased before 6 April 2006, provided they are not
materially improved (unless for a statutory requirement) on or
after 6 April 2006.
No protection for any investments in residential property made by small mandatory approved schemes set up and approved after midnight on PBR day. |
in the table PBR means 5 December 2005
In the table A Day means 6 April 2006.
All terminology and reference to scheme types relates to the
pension rules applying pre A Day. Refer to the relevant pre A Day
guidance manuals for those schemes for any clarification of the
terms and rules.
Purchases regarded as having been made
In the table above, a purchase is regarded as having been
made where:
Purchases regarded as not having been made
A purchase will not be regarded as having been made at the
appropriate time where:
Improvement expenditure is regarded as having been made before an appropriate time where:
Where a SIPP had acquired a property - for example off-plan -
with the intention of holding it as an investment but as a result
of the taxable property changes announced at the 2005 pre budget
report the decision was taken to dispose of that property it is not
axiomatic that this disposal would be classified as "trading". Each
situation is decided on its own particular facts and general
guidance regarding the approach to be taken in determining whether
a transaction is to be regarded as trading or investment can be
found in the Business Income Manual at BIM 60000 onwards.
But if the asset was acquired with the intention to hold as
an investment (BIM 60030) and was disposed of following the taxable
property changes, unless there has been a change of intention (of
the type discussed in BIM 60060) normally resulting in some form of
physical change to the asset, this transaction is unlikely to be
regarded as a trading one.
In the case of off-plan, the fact that it was in the process
of being developed at 5 December 2005 in accordance with the
contract originally entered into between the developer and the
SIPP, would not make it a trading transaction for the SIPP where
the development continues.
| Glossary ( RPSM20000000) |
