The Advantages of Buying Commercial Property Inside a SSAS
Many of our clients use their SSAS to buy commercial property and there are considerable benefits.
What Kind of Properties Can I Purchase?
Properties that are eligible for purchase within a SSAS are typically; shops, factories, administration offices, childrens’ homes, hotels, pubs, medical and dental surgeries, nurseries, therapy rooms, and light industrial units, amongst others. Land is normally eligible too.
Where there is doubt we simply ask clients to share the details of the proposed property so that we can confirm eligibility with HMRC.
What are the Advantages?
Opening a SSAS with a new Commercial Property or Land
If you have money in a SSAS and want to purchase land or a new commercial property, it is a simple transaction to buy that asset using your SSAS. Any rent paid is payable tax free into SSAS by the tenant, giving tax free growth within your pension.
Holding an asset inside a SSAS pension means that growth in the value of the asset is exempt from Capital Gains Tax which can offer huge savings. Assets held inside your SSAS are also exempt from Inheritance Tax.
Opening a SSAS with an Existing Commercial Property
If you’ve opened up your SSAS with One Crown and you already own commercial property then there is a tremendous advantage in the SSAS acquiring the property off you.
If you have a premises from which you trade and it is held on the sponsoring company’s balance sheet then it is possible for the Company to contribute money to the SSAS and then use those funds with eligible borrowing, if required, to purchase the property from the Company.
SSAS enables members to spin funds so that a contribution from the Company can be used to fund acquisition of an asset from the Company and direct the funds back to the Company.
If the property originally bought within the Company has gone up in value there may be some Capital Gains Tax to pay, but hopefully that will be offset by the Corporation Tax savings made on contributions made by the Company.
Properties Inside SSAS
Once the property is held inside the SSAS and if your Company is the tenant you will need a Tenancy Agreement agreed with your Solicitor. The sponsoring Company will pay rent to the SSAS which is now the owner of the property. This has two advantages:
- Rent is a tax deductible expense, saving additional Corporation Tax.
- The property is off the balance sheet and sitting within the SSAS, meaning it is no longer exposed to creditors. Many Company owners like the idea of protecting their assets for the long term with the added benefit of rent accruing within the pension.
The FRI Lease for Repairing and Insuring
One of the key advantages of an agreement on a commercial property vs. residential buy to let property is that it is known as an FRI Lease for Repairing and Insuring. The tenant is entirely responsible for looking after and maintaining the property, so you will not incur the unexpected demands and costs required to maintain residential buy to let property.
