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Purchasing commercial property through a pension fund is becoming increasingly popular among business owners because of its tax efficiency.
We’re highly experienced in helping owners purchase commercial property through a pension and reviewing current pension arrangements to help with buying the property.
Maximising your pension to take control
Buying a business premises through a pension fund can be done through a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Pension Scheme (SSAS). The difference between these and a traditional pension is that you have greater control over the money and where you invest it.
Self-Invested Personal Pension (SIPP)
This offers flexibility in investing in commercial property, giving you the opportunity to see your pension savings.
There are tax advantages to this too, as capital gains and income generated from the property are normally tax-free, which might reduce the overall cost.
Finally, don’t forget that the SIPP owns the property while your business can lease it, giving you rental income to your pension fund.
Self-Administered Pension Scheme (SSAS)
This is ideal if you have a small to medium-sized business looking to control your pension investments.
Similarly to SIPP, a SSAS can invest in commercial property, giving similar flexibility and tax benefits.
There is also a loan facility for SSAS: up to 50% of the value can be backed up to your business, which is useful for additional liquidity when purchasing property.
Benefits of purchasing business premises through a pension
There are a number of great benefits, which include:
- You can pick the property you wish to purchase with your pension (the property should be commercial and capable of being income producing)
- Purchase costs are met by the pension
- Generous tax relief on pension funds to purchase property
- No income tax on the rental income
- No Capital Gains Tax on the eventual sale of the property within the pension
- The property can be transferred into an Approved Retirement Fund at retirement
- Borrowing can be used to enable the purchase (if available)
- Fund can be VAT-registered if necessary, and potentially VAT reclaimed
- The SIPP or SSAS will own the property; you could be one of the trustees of that scheme
Please remember the potential risks as well, including:
- Reduced diversification
- You may not be able to sell the property to release funds quickly
- The costs that come with property purchase and ownership
- The value of property can fall as well as rise
Contact us today for expert advice
Acquiring business premises is a large investment that requires careful consideration and planning. Our advisers are on-hand to help support and guide you with whatever questions or concerns you may have. By having the knowledge to understand everything involved gives you the ability to make suitable decisions that will benefit your business today, and for the future.
This article is intended for information only. It is not financial advice or a recommendation and should not be considered as such. If you choose to invest, please remember the value of investments and any income derived from them can fall as well as rise and you may get back less than you put in.
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