SUMMARY FROM YOUR CHATBOT:
You have (or will have!) a SSAS and are buying a Commercial Property from one of your existing businesses – which can be your property company, or even an LLP. 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!

By ‘commercial’ we mean that the property is actually classified as ‘commercial’ at the local Council – rather than being a residential property that just happens to contain a ‘business’. Classification of C1 for example is ‘commercial’ but C3 or C4 may mean the property is not actually ‘commercial’ in pensions terms.

Your aim for this purchase is to convert the property into a number of smaller commercial units which you will then sell (rather than 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?
As this is a commercial property there are no issues with it being purchased inside your SSAS – the purchase costs and the conversion costs can all be met from the SSAS fund (After borrowing!) and any rent received will be tax exempt as the landlord is a ‘pension’. As a ‘connected’ buyer it is important that there is a proper 3rd party valuation – rather than you simply plucking a figure out of a hat. The SSAS will become the owner and the Trustees need to have evidence that the price being paid is the right one. 

ADDITIONAL NOTE:
If you want to pay one of your own companies (or an LLP) to do the work in converting the original commercial unit into the smaller individual units – 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.

Splitting the title of the property into a selection of smaller titles is allowed and can often increase the overall value – which is a gain that falls into the SSAS – which is also tax exempt.

As an investment, there are no special issues – a commercial property is allowed and can be sub-divided. It is OK for the Sponsoring Employer to rent one of the units, as it will simply be a tenant like all the others.

Having all the money available in the SSAS removes any of the issued related to SSAS Borrowing too.

All rent and 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 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. As you are wanting to sell rather than rent long term, it might be that a REIT is not appropriate (as they have to hold investments for a min of 3 years) – but the GDCV would be fine and would increase the borrowing allowed.

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%.

VAT NOTE:
If the commercial property has been ‘opted for tax’ – this will mean that the SSAS itself will need to become VAT Registered and charge VAT on the rent it charges on each unit. The process whereby a SSAS gets a VAT number is different to other ‘trades’ – because a pension cannot trade! Some accountants and VAT advisors can be uncomfortable with this SSAS specific process – which is why Segmented Solutions Limited offers a ‘SSAS VAT REGISTRATION’ service (£500 + VAT). This includes the VAT Registration and support with setting up any software needed for submitting VAT returns under the ‘Making Tax Digital’ regime. (A SSAS does not have a UTR like a company or an individual, so the software itself needs to deal with this issue – hence our SSAS service is often required at this point too).

When buying an ‘opted’ property don’t forget that VAT will be applied before SDLT is calculated – so the overall costs will be higher than the sale price on the property particulars. However there may be an SDLT exemption to assist with this. 

If buying a commercial property and the tenant is staying on and becoming a tenant of the SSAS (the new landlord) – then the purchase may qualify for a VAT exemption as the purchase could be a ‘transfer of a going concern’ (TOGC) – meaning that there will be no VAT payment due and therefore less SDLT too. TOGC rules are very specific – the existing tenant must be staying on. The existing tenant cannot be connected to the buyer and they must have a proper lease rather than be renting out the under stairs cupboard. Even if the purchase qualifies for this exemption – the SSAS will still need to have sent in their VAT application BEFORE completion.

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.