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Tax Efficient Property Purchase

Thinking of how to purchase a commercial property in a tax efficient way, then consider a SSAS and SIPP Commercial Property purchase. There are many advantages to using a SSAS (Small Self-Administered Scheme) or A self-invested personal pension (SIPP).

How it works, these are pension ‘wrapper's’ that holds investments and works in a similar way to a standard personal pension. The main difference is that with a SSAS or SIPP, you have more flexibility with the investments you select, like property.

Individuals can place their business premises into SSAS or SIPP, and the pension scheme rents the property back to the business, meaning the rental income paid goes back into the pension to be reinvested and the rent paid reduces the taxable income the company pays.

Members can pay personal contributions but it is normal for SSAS or SIPP to be funded by employer contributions, to reduce National Insurance liability.

Many investors in SSAS or SIPP may not have sufficient funds to purchase a commercial property outright but the rules allow the pension holder to borrow up to 50% of the value of the pension pot to fund the purchase.

Transfers from other pension schemes can be accepted. If you’ve worked for several employers or have personal pensions, you may be able to transfer your existing pots into your account SSAS or SIPP. This could build up your value of the pension pot to fund the purchase.

You can transfer most types of pension to a SSAS or SIPP These include:

  • Personal and stakeholder pensions
  • Most Additional Voluntary Contribution plans (AVCs) including Free Standing AVCs
  • Executive Pension Plans
  • Most paid-up occupational money purchase pensions

By using a SSAS or SIPP you could get tax relief on contributions investments into the scheme and any gain on the property value is free from Capital Gains tax.
Open market rent is paid to the SSAS or SIPP pension is free from income tax. Plus rental income payable by the tenants can be treated by them as a business expense for tax purposes.

Like all pensions, a SSAS or SIPP's are one of the most tax-efficient ways of saving, as the government will normally boost you investments with tax relief, which is one of the key benefits of all pension schemes.

Unlimited withdrawals from age 55, up to 25% tax-free and the rest taxed as income.

Any money left in your pension when you die can usually be passed to your heirs free of inheritance tax. Any withdrawals they then make will usually be tax free if you died before you were 75. If you die when 75 or older any withdrawals will be taxed as their income or potentially taxed at 45% if taken as a single lump sum.

We can help as commercial property specialists with advising you on how best to set up SSAS or SIPP. Whatever your business, and however much money you need, will do everything possible to help you. For more specific help and to talk through you options, call our team of expert advisers today.