Buying French Leaseback property with your pension Article Published: 14:19 15/01/2008 Article Classification: Val d Allos
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David Anderson of Sykes Anderson LLP English solicitors and Chartered Tax Advisers and leading expert on French taxation discusses how individuals can use pension money to buy French leaseback property.

Please note that the information herein is of a general nature and you should not act or refrain from acting on it without professional advice on the specific facts of your case. Taxation and law are complex subjects and the information herein is intended only for general information. Nothing herein constitutes financial advice.

Q: I have heard that UK residents can transfer their pension funds into Self Invested Personal Pension Plans called SIPPs and use them to buy commercial property including French leaseback property. Is this true?

A: Yes. This has been the case for many years though the rules have recently been relaxed in the UK to allow a wider class of assets to be bought.

Q: So are you saying a UK SIPP pension fund could buy a leaseback flat in France? I thought you said only commercial property could go into a SIPP.

A: The leaseback flats in France are usually part of hotels or parahotels and these are included within the definition of “commercial property”. The SIPP buys the flat and leases it back on a French commercial lease to a management company for anything from 9 to 20 years for hotel use. The management company will have to pay the rent to the SIPP pension fund. There is French VAT at 19.6% on new build properties but because this is a commercial transaction in France you can recover the French VAT which is paid back to the pension fund.

Q: How is this relevant to ROI residents?

A: At the moment it is not usually possible for ROI residents to use their pension funds to buy French leaseback properties or indeed French commercial land including farmland. However, in April 2006 The UK revoked the UK-ROI agreement dealing with the transfer of pensions and the position is now regulated by European law which simplifies the transfer. It is now relatively straightforward to transfer certain types of pension to a UK SIPP and then buy a French leaseback through the UK SIPP.

Q: How easy is this to do?

A: Very. You simply contact the UK SIPP provider and ask them to arrange for a transfer of the Irish pension money to the UK. The administrative requirements may vary from case to case and you should always seek independent financial advice as to the benefits of the transfer.