Case Studies

A Successful SME based in Leeds, acquired their current trading premises in 2019 for £700,000 which included borrowing of £450,000k. Company wanted to look at reducing or eliminating the debt due to the increasing interest rates, but also look to develop the site in the future. Loan capital being paid from net of tax profits.

The accountant recommended talking to One Crown Pensions Ltd to explore the options around using pension to buy the building and improve tax efficiency.

We set up a SSAS for each of the directors (3) as they are not related. The company was in a position to maximise contributions for each director, making use of carried forward allowances, making total contributions of £540,000k*, which will save the company £135,000k of Corporation Tax @25% rate.

SSAS will purchase the building, with the company making a loan to the SSAS to enable the purchase, in the process the existing commercial loan will be repaid. Sale proceeds in excess of the outstanding commercial loan will be sent back to the company and used for future pension contributions.

Rent of £80,000 is now payable to the SSAS, saving the company £20,000k pa. Corporation Tax @25%. Rent paid to SSAS without tax, used to repay SSAS loan, plus future contributions which will attract further corporate tax savings. Rent will clear the debt in 2.5 years.

In 5 years and assuming that the directors continue to make use of their £60,000k annual contribution allowance the total tax savings will be assuming the current CT rate of 25%:

Initial contributions £540,000k tax saved £135,000k

4 years x £60,000k x 3 directors £720,000k tax saved £180,000k

5 years of rent @£80,000kpa £400,000k tax saved £100,000K

George and Nicky, husband and wife ran a successful business from trading premises that their company bought a few years earlier for £250,000, it has an outstanding mortgage on the property of £100,000 with a high street lender. They have been making good and steady profits in the business, and have become concerned about 2 issues.

The amount of Corporation Tax that they would now have to pay following the tax increase to 25%, The interest rate on the property loan has now increased significantly over the last year.

They approached their accountant for suggestions to look at ways of helping to mitigate these issues. The accountant brought in the One Crown Pensions Practitioner Team as they have the experience to assist these types of issues.
Following a review of their business and personal circumstances, they decided to set up a SSAS pension for the business. George and Nicky as Directors of the business became members of the SSAS. The Company made contributions totalling £300,000 in the first year as they had unused carried forward allowances available.

The SSAS Pension then arranged to purchase the property from the Company at the current market value of £280,000, using the funds to settle the outstanding bank loan in the process, the excess funds being paid back to the Company.

The Company saved Corporation Tax of £75,000. The loan was repaid saving annual payments of £12,000pa, in effect the HMRC paying 25% of the outstanding debt. The Company now pays rent to the SSAS of £26,000 pa all of which is tax deductible, saving a further £6,500pa. The Rent is received at gross into the SSAS.

In 10 years- time, assuming no further contributions and no rise in the value of the property, the SSAS will be worth:

Property    £280,000
Cash          £20,000
Rental Income   £260,000
Total         £560,000 equivalent to approx. 86% return on initial capital
Total tax savings made = £75,000+ £65000 (10x £6,500@25%) = £140,000