SSAS PROPERTY CHATBOT REPORT:
Thank you for working your way through our SSAS PROPERTY CHATBOT – before you read the report below, please bear in mind that this is not to be taken as any form of ‘advice’. The report is for information purposes only and there may be specific technical details within your personal and business circumstances that changes the report’s findings.
If you want to arrange a FREE Tax and SSAS Consultation with the creator of this SSAS PROPERTY CHATBOT – please feel free to do so using the link below.
NOTE: Anyone with an existing SSAS Provider (i.e Professional Trustee, Administrator or Practitioner) may not have access to all of the solutions mentioned within this report. If that is the case – then you may wish to speak to Segmented Solutions about them taking on the ‘Practitionership’ of your SSAS. We do not offer a TRUSTEE or ADMINISTRATOR service – as we believe you should have total control and flexibility within your SSAS. All whilst having the support of an technically experienced Pensions Professional who acts as your Scheme Practitioner.
SUMMARY FROM YOUR CHATBOT:
You have (or will have!) a SSAS and are buying some land from one of your own businesses (or indeed 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 land. It cannot be ‘made up’ by you simply to fit with the plans you have or to reduce taxes on the sale!
As the land does not contain any specific building it is simply seen as an allowable SSAS investment – which in this case you say you will rent out.
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?
The purchase of land is allowed within your SSAS – although it is really important to appreciate that the SSAS cannot ‘trade’ – so it cannot be seen as trading in buying and selling different plots of land. There is nothing wrong with buying and holding the land as a long term income producing asset.
Another aspect to ‘trading’ is that the SSAS cannot run a business from the land. Anything that might be classed as a ‘trade’ should be carried on by a 3rd party – even if that 3rd party is related to you, the SSAS or the Sponsoring Employer.
Where the tenant is related to the SSAS or the Sponsoring Employer, the rent needs to be properly assessed by an independent 3rd party (in the same way as the initial purchase price has been independently assessed).
Basically – the rent charged will be received tax free in the SSAS and any uplift in value will be tax free in the SSAS – but any trading activities will be received by a 3rd party company/individual that is outside the SSAS and would therefore pay taxes accordingly.
This is a relatively simple scenario, as you said you wanted to rent the land out for an income – rather than develop it or split it up into smaller plots.
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. (Masterclass Video 2 is posted at the bottom of this page).
However if you use a GDCV or REIT as the structure for your property 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 property has the same owners (Directors/Shareholders or Partners) as the SSAS has Member Trustees – then the property 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.