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 a Commercial Property from an unconnected 3rd party. This means 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.
By an unconnected 3rd party we mean a seller where there is no formal connection – you are not a Director or Shareholder (or Partner if an LLP).
Your aim for this purchase is to convert the property into a number of smaller commercial units which you will then sell for a profit. All the money you need for this deal is sat in your SSAS (or will be once you establish one!).
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 and any rent received prior to you selling the property will be tax exempt as the landlord is a ‘pension’.
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 or improved. It is OK for the Sponsoring Employer to rent one of the units, as it will simply be a tenant like all the others. You can then elect to sell the other units – or indeed sell them all with the Sponsoring Employer as a tenant.
Having all the money available in the SSAS removes any of the issued related to SSAS Borrowing – which is helpful.
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.
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.
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.
As you are planning on splitting the commercial unit into a number of smaller units – and then selling them – there may be VAT issues based on the fact that the ‘option’ to tax is based on the 1 larger commercial unit and if any title splitting has been done in preparation of a sale – there will be VAT details to be dealt with so the buyer can be given the correct details. This is 100% one for a VAT expert’s advice (!). However if you are simply partitioning off a large unit to allow multiple tenants – then there are fewer VAT issues as you’d be selling the development as 1 single commercial unit with multiple tenants inside.
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.