By using SSAS or a Self Invested Pension Plan ( SIPP) we have many business clients who have purchased commercial properties under both of the above HMRC approved Pension Schemes and benefitted from considerable tax relief and avoided incurring borrowings or using personal or corporate cash to purchase commercial property
The benefits of this HMRC approved innovative option are clearly demonstrated by the recent advice that we provided to a client below :
Client Circumstances :
- These clients wanted to purchase a commercial property for £850,000 as they were paying over £120,000 a year in rent for premises and felt that this was “dead money” , they were proposing to invest over £300,000 of the company funds ( receive no tax relief ) and then borrow £600,000 from their bank
- Thankfully the client contacted us to discuss their options before proceeding , and as they had over £600,000 between all directors built up in Pension Funds we found a far more efficient solution which radically improved there cash reserves and saved a considerable amount of tax
Our Advice :-
- We considered the Directors existing pension benefits and transferred these funds to a SIPP , then we calculated that the Company was able to make Pension Contributions of £300,000 for all Directors and receive full Corporation Tax relief without the Directors incurring any personal Tax or National Insurance liability to fund the property purchase under the SIPP
Benefits of this advice :
- Full tax relief on the Pension Contribution reducing the Company’s Corporation Tax liability by £60,000 ,and also personal Income tax was avoided on withdrawing the £300,000 from the company which otherwise would have triggered £135,000 in Income Tax if these funds had been withdrawn as dividends
- When owned by the SIPP there are additional considerable tax benefits as follows :
- All rent is paid to the pension fund free of tax and also fully deductible as a business expense to the tenant / business
- All assets including this property are protected from Inheritance Tax
- All assets of Pension funds are protected from Creditors
- The company has no borrowings associated with this property purchase
Please note that HMRC permit SIPPs to invest a wide variety of commercial Property under a SIPP including the following :
- Retail property
- Warehousing
- Agricultural land
- Offices
- Hotels
- Nursing Homes
- Public houses
- Industrial unit
- Sports facilities
- Stables/livery
- Woodland
If either of the above options are of potential interest to you please contact us to discuss your current circumstances and objectives