Owning commercial property in a pension scheme

Business office - Owning commercial property in a pension scheme

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Did you know that it’s possible to own commercial property in a pension scheme? James Corby, Business Development Manager of our SSAS Administration arm (Channack Ross Ltd) explains how this can be achieved through a SSAS.

A SSAS (Small Self-Administered Scheme) is a type of occupational pension scheme offering flexibility on investment over more ‘conventional’ pension schemes. The SSAS puts the control into the hands of the pension scheme members, who are typically directors/key employees of the business that set up the scheme.

Our business owns the company premises… How can a SSAS help?

One aspect that sets a SSAS apart from most other pension schemes, is the ability to invest directly into commercial property. This sees the pension take on the role as landlord, and as such takes the investment return from the rental payable. Whilst a SSAS does not discriminate when it comes to commercial property and the tenancy of that property, one opportunity that presents itself with a SSAS is to invest directly in your own business premises. I always say that the aim of a SSAS is to create an intrinsic link between your business, and your pension fund. Using this method of starting-up, the key advantages are listed below:

  • Cash injection for business
    If the business owns the property, selling to your pension fund can help create that funding needed for that next major project.

  • Pooled investment
    With the chance to involve a number of people (directors/family e.g.) in the SSAS, with greater capital comes greater opportunity for investment and growth.
  • Borrowing/Partial Purchase
    The SSAS has the ability to borrow funds from a bank, business or individual – up to 50% of the value of the SSAS. If the SSAS value is less than the property value, it is still possible to purchase a share of the property, and benefit from an equivalent proportion of the rent (with the chance to buy more as the fund grows).
  • Tax-free investment growth
    Your business pays your pension rent, and that rent as investment growth in a pension is tax-free. This of course differs if an individual or a business received rent.
  • Tax relief now
    Pension contributions carry Corporation Tax Relief for the business, as does the “new” rent that would be payable as the SSAS’s investment growth.
  • Tax relief later
    Ownership through a pension means the asset is outside of the Estate for Inheritance Tax, and if the property is sold by the pension scheme in the future, there is no Capital Gains Tax on any profit.

The wonderful thing about businesses and SSASs for that matter; is that no two are the same. If this scenario resonates with your business and planning, contact us today.

This content is for information purposes and should not be treated as advice. Occupational pension schemes are regulated by The Pensions Regulator.

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