SIPPS or SSAS: Which is Best For Buying Commercial Property as Investment?

SIPP or SSAS, which is bestfor commercial property?Scots Financial Advisor William George IFAexplains these importantinvestment vehicles...

Copyright: All Rights Reserved 2013 William George IFA www.williamgeorgeifa.co.uk

http://www.williamgeorgeifa.co.uk

"Great question,both are good but they havedifferent uses."Now let's take a look at why both are helpful for retirement planningwhen combined with commercialproperty investment...



SIPP or SSAS For Commercial Property

Q: What is a SIPP?

A: It's a Self Invested Personal Pension Plan that is suited to those who like more hands on control of their pension investments.

It is for INDIVIDUALS.




Q: What is an SSAS?

A: A Small Self Administered Scheme, also known as a SSAS, is most often used by a group of people.

Companies usually set up this type of scheme for high level personnel and directors. Because it is for employees, it’s considered to be an occupational pension that can have up to eleven people in the group.




Q: As an individual why use a SIPP?

A: Because they are often used as a retirement vehicle due to their flexibility and ability to invest in the lucrative commercial property market.

It is a TAX efficient way to use pension funds.




Q: I have a small business will a SIPP suit me?

By far the most common use of a SIPP has been through small businesses using their pension funds to buy their own business premises, so yes, using a SIPP could suit a small business owner well.

Changes to the pension rules in 2006, means that it is now possible to do this, even if the property is already owned by them or someone connected to them.

However it should be noted that these types of arrangements are subject to strict criteria must be done on a commercial basis.Rent paid to a SIPP must be a market rent.




Q: What advantages will this give me?

Buying your pension within a SIPP has several tax advantages.

The rent you pay to the pension fund can be paid free of tax because it is a deductible business expense. If you sell your property when it is contained within the pension fund then there is no capital gains tax payable.

Also, if you die before age 75 and have not started taking your pension yet then your property can be paid into your estate free of inheritance tax.




Q: As a group why use an SSAS?

A: Because there are a number of benefits that come to members of a SSAS occupational pension scheme. These benefits can be realised on the death of the member or upon their retirement.

However, at no time, during the membership in the scheme, can any part of the SSAS provide benefits, whether directly or indirectly, to a member or that member’s family.




Q: What are benefits of being in an SSAS?

A: Key benefits are substantial; when the company buys a property, it provides the company with corporate tax relief, as funds entered into the SSAS are not fully taxable.

Furthermore, should the property be sold or rented, the company does not incur tax liabilities from the sale of the property, or from the income derived from rental of the property, thereby effectively lowering the company’s tax exposure.




There are more SSAS benefits too...

Trustees can make loans, from the scheme, to the company or companies associated with the original company, as pertaining to the company’s business.

Borrowing is allowed to purchase assets but restricted to...

● Commercial properties.

● No more than 45% of the market value, plus 3x annual contributions from employer, plus 3x member contributions per annum. The SSAS must exclude the value of assets set aside for the death of member or retirement of member.

● The IR SPSS must be notified, if loan is over 6 months, and when funds borrowed less than 10% of current market value of fund, or £50,000.




Q: What about shares in an SSAS?

A: Trustees of the SSAS may not purchase more than 30% of shares in an unlisted company. Trustees are not allowed to buy shares from other members or people associated with a member.

Members are not allowed to buy from a company that is sponsoring the Small Self Administered Scheme. A 30% limit is applied to voting rights and dividends of the SSAS.




Q: What are "Acceptable" investments?

The PSO state these investments are acceptable...

● Shares in the company● Company deposit accounts● Commodity Futures● Financial Futures● Trading Options● Copyrights




Q: What are "Non-Acceptable" investments?

Certain activities and assets are considered to be non-acceptable. Trustees cannot loan to...

● Other members or those connected to a member of the SSAS.● A sponsoring company or a company deemed to be associated,

unless the rate meets the current non-commercial rate.● A sponsoring company or a company deemed to be associated,

unless it is for commercial purposes that have been approved.● Insolvent companies.● If monies are being use to rescue a company facing insolvency.




Q: Anything else to note?

A: Yes, re LOANS with an SSAS. The loan cannot exceed 25% during the first two years of its existence. Plus, it cannot include funds from another scheme until after the two year period has been met. After the two year waiting period, the scheme can then loan up to 50% from the pension fund.

All loans must be for the company’s business and interest rates on the loan must be 3% over the base rate that banks use on the day of the loan. Other conditions may apply and your financial advisor is the best person to explain the process in full detail.



"So, using aSIPP or SSAS to invest inCommercial Property canbring solid benefits."If you need more adviceplease do phone me below...

Call FREE on 0800 321 3508



SIPPS or SSAS: Which is Best For Buying Commercial Property as Investment?

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Transcript of SIPPS or SSAS: Which is Best For Buying Commercial Property as Investment?