Why purchasing a commercial property via a SIPP or SSAS is an attractive option for Small and Medium-sized Enterprise (SME) directors looking for business premises.
For SME directors, using pension fund money to buy the property can be a very positive outcome, as opposed to paying rent to a 3rd party.
Here are a few reasons why a SIPP/SSAS could be a good tax efficient option:
Corporation Tax – Rent and employer contributions are business expenses, therefore payments will reduce the company’s profits and any Corporation Tax liability.
Capital Gains Tax – Future growth in the capital value of the property is free from any Capital Gains Tax whilst it is owned by the SIPP/SSAS.
Inheritance Tax – Once in the SIPP/SSAS the property sits outside of the client’s estate for the IHT purposes (This may be subject to change in 2027).
Tax relief – Any member contributions will benefit from tax relief at the member’s marginal rate, subject to the Annual Allowance rules. Rent payments do not count towards the Annual Allowance.
Rent Payments – These are received into the SIPP tax free.
Property assets owned by SIPPs/SSASs are usually protected from a liquidator, should the company get into financial difficulty.