Often business premises are owned by the business, this could be for many reasons for example the business has multiple owners or it helps to increase the business net worth.
But in many cases it would be better for the premises to be owned by the business owners pension fund because:
- The object of the business is not to own its own property, the objective should be for the business to make profits from trading
- The business could use cash tied up in the premises to invest in trading activities
- Pensions are a very tax efficient method of ownership – no capital gains, no tax on rental profits
- Company Pension Contributions are Tax Deductible and Individual contributions get income tax refunds
- You may be able to use 3 year Carry Forward to get funds into your pension scheme
In summary to move your business premises from your business to a SIPP or SSAS pension you would do the following:
- Find a lender prepared to lend a third of the property value to your pension scheme (which will be half the value of the fund ie if the property was valued at £300k, your pension could borrow £100k which is 50% of the £200k which will need to be funded by your pension scheme)
- Have the premises independently valued and rent assessed and appoint solicitors
- Create a SSAS or SIPP pension (you can include other people in your SSAS or SIPP investments)
- Transfer into your SSAS or SIPP any funds you have in other pension schemes
- As you are the business owner and its your pension scheme your business could make a payment into your pension scheme, the maximum for the last 3 years would be £140k (£50k + £50k + £40k) see details of NRE
- The pension contribution from your company could be an In Specie payment (meaning its in kind not cash)
- You could make a personal payment to your pension and if you are a higher rate tax payer your will get a tax refund via your self assessment return
- Then your pension scheme buys the premises from your business and rents it back to the business
steve@bicknells.net
