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UK Tax Breaks For Buying Caribbean Property
July 28, 2009Article by Ray Withers
Savvy UK property investors have suddenly realised that they can zip up Caribbean property resorts in to a SIPP (self-invested personal pension) and rack up a lot of tax benefits.Most investors realise commercial property is a suitable SIPP investment – few understand that the definition of commercial property can include hotels.If SIPP owns the entire hotel or is a joint owner of the entire hotel then this is commercial not residential property under UK tax rules.
Hotels and similar accommodation are considered residential property where the interest held is ownership or joint ownership of a part of the hotel rather than the whole hotel and SIPP investors have no rights to use accommodation in the hotel or another hotel as part of their ownership agreement.
This includes buying a 99-year lease on a single hotel room giving the right to stay in the hotel at a reduced or free rate. The right does not have to relate to a specific room.Also included are timeshare rights in the hotel, like the right to stay in the hotel for two weeks every August.If the SIPP holds an interest in the entire hotel, then that will not be residential property.
This applies whether the pension scheme owns all of the property or if the pension scheme is a joint owner of the entire hotel. In this case, the hotel is treated as commercial property.This is important because holding residential property in a pension scheme can lead to high tax penalties.
UK expats can wrap up resort deals in to a QROPS (qualifying recognised overseas pension scheme) that acts in a similar way to a SIPP.SIPPs are tax effective investments for UK residents – but not everyone can gain full advantage, so it is best to take advice from a SIPP specialist advisor before committing to any purchase.
A typical Caribbean investment that is suitable for putting in a SIPPS under the right circumstances is Bacolet Bay, Grenada A 5 star resort set in 41 acres of tropical gardens. Buy-in starts from £71,550.
The resort has world-class spa, leisure and dining facilities and offers high net yields of between 11.3% and 14.3%