The Chancellor forbade buying holiday homes within pensions at the end of 2005. However, Sykes Anderson has claimed investors can circumnavigate the rules by purchasing tourist apartments under the French Leaseback scheme, which is usually classed as commercial property and so qualifies for SIPPs.
Stuart Law, managing director of Assetz, commented: "It is irresponsible to encourage investors to buy leaseback property in France through their SIPP, considering the Finance Bill permitting this will not become law until this July.
"The Chancellor has already demonstrated his 'flip-flop' attitude towards such investments, which are permitted one minute and then forbidden the next. There is no doubt that the Government is dead against the private purchase of residential property within a pension, which it recognises as little more than tax avoidance for the rich, so it is quite likely that this loophole will be closed before the Finance Act later in the summer. Investors would then fax huge unexpected tax bills.
"In any case, British and French banks will not currently lend to a pension fund, meaning investors are likely to find that purchasing privately with higher levels of borrowing will produce better long-term returns.
"I would strongly recommend that investors wait until July before going ahead with the purchase of leaseback property within their pension, and those that have already invested should seriously consider their position."
