SUMMARY FROM YOUR CHATBOT:
You have (or will have!) a SSAS and are buying some land from one of your own businesses (or yourself). The key to this purchase is that you are seen as a ‘connected’ buyer and so there needs to be an independent 3rd party valuation in order to ensure that the SSAS Trustees are paying the right price for the property. It cannot be ‘made up’ by you simply to fit with the plans you have or to reduce taxes on the sale! 

Your aim for this purchase is to develop the land and build a commercial unit (or units) on the land. You then intend to rent the the site and make an income. As not all the money you need for this deal is sat in your SSAS (or will be once you establish one!) – you are looking for additional funds by way of the SSAS borrowing money.

One really important factor with property planning using a SSAS is that of ‘trading’ – if your SSAS intends to buy, refurb, develop etc then sell – that is a ‘trade’ – which would trigger a tax charge on the profits of the trade. I guess if this were allowed almost everyone would use their SSAS to run a business and no Corporation Tax would ever be paid! So no matter what you want to do, if your intent up front is to buy in order to do stuff then sell – there is a risk of a tax charge. However using a GDCV or REIT turns these activities from a ‘trade’ into an ‘investment’ as the SSAS simply holds units or shares and all of the ‘activity’ falls into the GDCV or REIT. This can sometimes make all the difference to the property planning, rather than simply looking at the type of property and what you want to do with it. We have added this note to all reports regardless of what is or is not ‘allowed’ in terms of property ownership in the SSAS.

IS THIS ALLOWED IN A SSAS?
Buying land in a SSAS is fine, so is the building of a commercial property. The only issue to examine relates to the valuation needing to be independent.

If you repeat this buying and selling process it might make this become a ‘trade’ and as a SSAS cannot trade, the tax exemptions on this business of buying/developing/selling will be at risk. A SSAS is able to receive gains from the sale of an investment it decided to sell – but if the intent from day 1 were to buy, develop then sell – this intent alone might make your plans open to HMRC saying it was a ‘trade’. 

There is an exempt structure that is allowed to be held within a SSAS – which is also allowed to ‘trade’ – so you may wish to explore this as an alternative. The structure is called a GDCV or Genuinely Diverse Commercial Vehicle. Which is basically a Unit Trust that allows a SSAS to buy units (investment) with the land development and selling (trade) happening at the unit trust level. 

ADDITIONAL NOTE:
If you want to pay one of your own companies (or an LLP) to do the work in developing the land – then the SSAS can be given a quote for the works and the Scheme Trustees can check that this quote is ‘reasonable’ and fully commercial (i.e you cannot beef up the costs in order to extract money from your SSAS before retirement!). If the works are accepted by the SSAS Trustees – then it is perfectly acceptable for the SSAS to pay you for doing the work as it is what any ‘unconnected’ builder/developer would be charging.

In this way you can earn a profit on the works and pay tax on the profits just like any other business. But it means you will have an income from your SSAS – as they will be one of your ‘property development’ customers!

The biggest issue is that the property remains as COMMERCIAL and there is no change of use to RESIDENTIAL.

All gains on sales will be tax exempt as the investment is held within a SSAS Pension. The only exposure to tax will be the profit earned on any refurbishment works carried out by you individually or carried out by your own property refurbishment business.

FUNDING NEEDED:
A SSAS can borrow upto 50% of its own value – meaning that a SSAS with £300,000 in it can borrow a total of £150,000 (i.e 50% x £300,000) – giving it a total available fund for the purchase of £450,000.  The lender to the SSAS can be a mortgage company, or indeed anyone who is willing to lend at the time. There is nothing wrong with the Sponsoring Employer lending money to the SSAS if it is unable to make ‘contributions’ to bring the SSAS fund up to the required value.

Obviously there is no tax relief on the interest charged – as the SSAS pays no tax (!) – but any rent received is tax exempt as the landlord is a ‘pension’.

If the Sponsoring Employer lends to the SSAS and charges interest, then the interest will be taxed as income in the hands of the business. Alternatively if an individual Member wishes to grant a loan IN to the SSAS – that too is allowable as long as the 50% maximum loan is not breached.

We do have a video that explains SSAS lending and borrowing. It is part of our SSAS Masterclass series and is on our home page and YouTube channel. (A copy of Masterclass Video number 2 is posted at the bottom of this page).

However if you use a GDCV as the structure for your land deal(s) – these are not restricted in terms of their borrowing. So the SSAS example earlier where it had £300,000 will not be restricted to £450,000. A lender may well allow a 60% mortgage – meaning that the £300,000 is now simply the ‘deposit’ with the lender allowing a further £450,000 as a mortgage, which means the ‘pot’ is now worth £750,000 rather than £450,000.

We have a SSAS Property Masterclass Video (Number 6 – also posted below!) that explains what a GDCV (Genuinely Commercial Commercial Vehicle) and REIT (Real Estate Investment Trust) are – but in simple terms they are 2 bespoke structures that receive specific exemptions from within the Pensions Act that allows them to deal with residential property as well as borrowing what they want from a bank (or indeed one of your businesses) – which removes the usual SSAS restrictions of 50%.

SDLT NOTE:
If your business that is selling the land has the same owners (Directors/Shareholders or Partners) as the SSAS has Member Trustees – then the land purchase is between connected parties and there is an exemption to SDLT that can be applied. This is specialist work and is carried out by our SDLT partners. In simple terms the SDLT will be reduced to zero with a cost of advice being paid instead of SDLT. The saving being approx 75% of the SDLT that would have been paid.

We will hand hold you through this SDLT planning and assist with the introductions as needed.

CONVEYANCING NOTE:
As you are buying from a ‘connected’ party, the Solicitors doing the conveyancing will need to have 2 offices – one to represent the SSAS and one to represent the seller – so if you want to use a Solicitor who is fully up to speed on ‘SSAS & Connected Party’ – we can point you in the right direction. The Solicitors we use have a London Office to look after the SSAS and a Manchester Office to look after the connected company seller. Everything is tidied up and there is no conflict of interest – which would be the case if using 1 Solicitor in 1 office. 

WHAT NOW?
If you want to establish a SSAS – there is a complete SSAS Establishment guide in the link below. All the documents and costs are explained in full. There is even a video that takes you through the entire process so you know what to expect.

If you run a profitable business and want to discuss your specific needs – before committing to a SSAS, then please book a free call with us – so we can assess your situation properly and make sure your plans will work for a SSAS. The booking link is also below.

Thank you again for your time in using our SSAS Property Chatbot – we trust it was a useful tool.