SSAS Pension Property: Can a SSAS Purchase a Percentage of Commercial Property?
A SSAS can indeed purchase a percentage of a commercial property.
If you’ve got funds in SSAS, having set one up under your trading Limited Company, and you own a commercial property but you don’t yet have the funds to buy all of the property, then the SSAS can purchase a small percentage.
This may be extremely helpful because it may allow you to recycle funds.
Example of a SSAS Pension Purchasing a Percentage of a Commercial Property
As an example, let’s say you’ve set up a SSAS under your Company and let’s say you’ve transferred existing pensions and you’ve put in £100,000 in contributions. But let’s say that the property you hold within the Company is worth £300,000.
For the sake of this example, we will assume the property is encumbered, meaning it has no debt on it. So, you could approach the Company and request to buy one third of the property. You have one third of the value held within SSAS and the Company will sell a third of the property to the SSAS, subject to a full valuation by an RCS Surveyor and accurate rental value.
We take care of the Paperwork: Because the SSAS is buying a third of the property, we would draw up a lease indicating the rental value.
If you’re buying a third of the property, then you will have to pay or the Company will have to pay one third of that rental value across to the SSAS Pension. This helps to put more funds back into the SSAS. In this example, it means the SSAS has just sent £100,000 of cash to the Company to purchase one third of the share of the property. Suddenly the Company is in funds, so to speak.
At this point we would come back to the Directors who have unused pension allowances. If they did, and we could work those figures out, then potentially the Company could make another contribution to the SSAS using the funds it received from the third sale of the share of the property. That puts another £100,000 back into the SSAS, providing the Company with yet more tax relief on that contribution.
As a result, the SSAS now has another £100,000 with which to buy another third share of the property, and the whole cycle goes on again. So, you can buy another third share, meaning the SSAS now owns two thirds and that £100,000 recycles back up to the SSAS again.
Yet again, the Company can make more contributions for the Directors and, yet again, that money can be used as a contribution, getting a further dose of tax release. Using this strategy, you can eventually buy the last share of the property, ensuring that the whole property has dropped into the SSAS and we’ve used the same money three times over and had tax relief on at least two thirds of it as it has gone around.
SSAS Pension Commercial Property Purchase
As you can see, this is a very clever way of potentially dropping commercial property into the SSAS that you already own. The rent would then be payable to the SSAS and that rent would be a tax deductible expense.
So, now you’ve got the £300,000 property in the SSAS, with all the rent coming in. What’s more, once the property is held within SSAS it is exempt from Capital Gains Tax and Inheritance Tax.
When to Speak with Your Accountant
If you have a trading Company that is holding commercial property that is of high value, there is always an issue that your assets on the balance sheet run the risk of your Company becoming an Investment Company. This is definitely something we suggest that you speak with your accountant about.
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