Property Syndicates

What is a Syndicate?

Sometimes SIPPs operate private syndicates to buy a property (as distinct from commercially run collective investment schemes).

For example, 3 SIPPs may have their own individual investments but they club together to buy a single property in the fixed ratios of, say, 50/25/25.

The property syndicate can have borrowing but this will be justified against each member’s SIPP individually (i.e. each SIPP can borrow no more than 50% of its own net fund value). The syndicate has its own bank account that collects rent and pays the borrowing costs. Perhaps every year the excess in the bank account is sent to the individual SIPP accounts in the 50/25/25 proportions.

Reason for Omni including Syndicates

Omni now allows you to store all the details to administer the property syndicate and then include the appropriate percentage of the net value of the syndicate in the investment valuation of each SIPP.

Setting Up a New Syndicate

To set up a new syndicate, de-select the current scheme using the File menu and then select ‘New Syndicate’ on the File menu. Once you enter your reference for the syndicate and the syndicate name and click ‘OK’, Omni takes you to the Syndicate view.

A property syndicate cannot have an interest in another property syndicate.

Syndicate View

When changing scheme, you can select a Property Syndicate in the same way as a normal scheme (you need to name the syndicates so that they are easily identified). When the Property Syndicate is selected, the main Omni menu changes to only show screens applicable to a Property Syndicate (e.g. the Bank menu is shown but the Scheme and Members menus are hidden).

The intention is that the Syndicate View is only used for property syndicates – if you want the general options (such as Base Rates) you have to de-select the syndicate or select an individual SIPP.

There is an additional menu option that allows you to enter the details of the Syndicate. You can select each scheme that participates in the syndicate and the initial percentage owned by each scheme.

If the percentages change then you can keep a history of the past proportions (and view it).

When a SIPP is added to the syndicate, Omni creates the investment stock in the individual scheme, so that the syndicate share is included in investment valuations.

Syndicate Address Book

On the Syndicate menu, the Scheme Address Book shows the advisers for the syndicate (which can be different from the individual members’ advisers). There is also the option to send bulk letters to syndicate members (by merging the addresses into a merge template that you have created) or to generate a bulk email to all syndicate members.

Bank Transactions

Bank transactions can be entered in the normal way except that the options are restricted e.g. you cannot enter contributions directly to a syndicate. Contributions and transfers have to be collected in each individual SIPP bank account and then the purchase of a share in the syndicate recorded as an ‘Investment Buy’ expenditure transaction in the individual member’s SIPP and a Subscription income transaction in the syndicate bank account.

A purchase of an interest in a syndicate is classed as a ‘Subscription’ in the bank account of the syndicate and a ‘Syndicate Buy’ for the expenditure in the member’s individual SIPP.

A sale of an interest in a syndicate is classed as a ‘Redemption’ in the bank account of the syndicate and a ‘Syndicate Sale’ for the income in the member’s individual SIPP.

A distribution from a syndicate (i.e. where an amount is spread between all members of the syndicate using their percentages) is categorised as a ‘Distribution’ in the syndicate bank account and ‘Synd – Distribution’ in the member’s individual SIPP.

Investment Valuations

When you run an investment valuation in a SIPP that has an interest in a syndicate, Omni will automatically run an investment valuation of the syndicate behind the scenes. It will allow for the latest value of the property, the bank account, any borrowing, any debtors and creditors, VAT due and rent prepayments. It follows all of the normal rules for an investment valuation of a normal scheme.

Omni will then apply the owner’s percentage to the net value of the syndicate and show this as an asset of the member’s SIPP. Omni doesn’t show how it has calculated the value of the syndicate but this can be found by running an investment valuation on the syndicate itself.

An individual SIPP can participate in any number of syndicates in different proportions. They will all be included in the investment valuation.

Distributions

There will generally be distributions from the syndicate to the owners’ SIPPs. For example, the rent will be collected in the syndicate bank account each quarter and all expenses will be met from from that account. Perhaps once a year, most of the balance will be split in the ownership percentages and transferred to the owners’ SIPPs.

To allow this, there are 2 specific bank transaction categories. The expenditure transaction from the syndicate is classed as a ‘Distribution’ and the income transaction into the owners’ SIPPs is classed as a ‘Synd distribution’. These items can be seen in the ‘Other Income and Expenditure’ screen.

To create distributions, there is a ‘Distribution’ button on the ‘Syndicate, Share of Property’ screen. You are asked to enter the date of the distribution and then the total amount to be distributed from the syndicate and the date of distribution. Omni will calculate the correct proportions, create the new bank transactions out of the syndicate (‘Distribution’ )and also create the new bank transactions into the main bank account of each of the owners’ SIPPs (‘Synd distribution’).

Scheme Returns – APSS313

When producing the HMRC Scheme Returns, Omni will apply the syndicate percentages to find each SIPP’s interest in the property at the end of the tax year. It will also find each rent payment received by the syndicate and apply the ownership percentages valid at the rent due date (these percentages can change over time). The rent shares are then totalled over each rent payment received in the tax year and added to the return.

XL Reports

A list of all syndicates can be found in XL reports.

Converting Data

Previously, Omni allowed data for property syndicates to be stored as schemes with the status of ‘Property’. When the syndicates were implemented these schemes were converted to property syndicates. The syndicates were set up and all the past information on properties and bank accounts was preserved but any data entered in the scheme and member screens is hidden (there should not have been any data in those screens). The value of the each scheme’s share of the syndicate was often entered as a segregated portfolio. A price/value of zero should be entered by the user for each of these segregated portfolios as at the conversion date. The stocks should then be archived.

After conversion, when an investment valuation is run as at a date prior to the conversion date, the historic values for the segregated portfolios will be included. When an investment valuation is run as at a date on or after the conversion date, the new basis of looking through to the syndicates will be used.