Tax
Free Cash by
using a SSAS for pre-retirement tax planning, the
company can significantly increase the tax free
lump sum the director receive at retirement age.
Use
a SSAS to eliminate corporation tax for the year!
By using our bespoke service, you can make contributions
to a SSAS to offset company tax, just use the SSAS
enquiry form
Permitted investments
The principle of all occupational pension schemes including
a SSAS is that they provide relevant benefits for the members
at retirement or on death. This means the IR SPSS must ensure
that a SSAS does not give non-relevant benefits to members or
to those persons connected to them.
Regulation S11614 requires the IR SPSS to approve investments
that provide relevant benefits at retirement or death. These
investments cannot provide direct or indirect benefit to the
members, such as the SSAS purchasing a residential property
to be used by a member and that member's family. Permitted SSAS
investments are as follows:
•
Property
A SSAS pension fund can be used to
purchase the commercial property occupied by the company
as the company is considered as a separate legal entity.
It is not possible to purchase property from a SSAS member
as this is a connected person. This route of the SSAS
purchasing a property has to be compared with the company
or the directors buying the property.
By using a SSAS pension fund to buy the property there
would have been corporation tax relief on contributions
to the SSAS. This means it costs less for the SSAS to
buy the property than the company as the later would make
the purchase net of corporation tax.
In a SSAS there is no liability to capital gains tax on
any subsequent sale of the property and all rental income
paid by the company to the trustees would not be liable
to income tax. Furthermore the rent paid by the company
is an allowable expense against corporation tax.
There are risks if the property represents most of the
assets in the SSAS pension fund, leading to a lack of
diversification and the risk that it could be difficult
to sell the property to realise the proceeds at retirement.
If the SSAS purchases the property the company cannot
use the property as security, or receive any capital allowances
on industrial buildings.
The SSAS must always charge the company a fair market
rent and if the SSAS borrowed money to purchase the property
it cannot receive income tax relief on the cost of servicing
these borrowing.
•
Loans
The trustees of the SSAS are allowed
to make loans from the pension fund to the company or
any associated company for the company's business. This
must be for a specified fixed term and at a commercial
rate of interest with the terms clearly indicated in a
loan agreement including confirmation of this loan from
the pensioneer trustee.
The maximum size of the loan as a percentage of the SSAS
pension fund is 25% within the first 2 years of the existence
but this cannot include any pension transfers from another
scheme. After 2 years the loan can be 50% of the SSAS
pension fund, however, these percentages exclude any assets
that are earmarked for a member that has retired or died.
The IR SPSS state that the purpose of the loan must be
for company business purposes only such as purchasing
commercial property or plant and machinery. The term can
be any as agreed by the parties that is consistent with
the purpose it is to be used for and the interest rate
charged must be bank base rate plus 3%.
•
Borrowing
The trustees of the SSAS can borrow
money to buy an asset if the pension fund does not have
the resources. The reason for the borrowing must be commercial,
such as purchasing commercial property.
The IR SPSS set maximum borrowing limits as 45% of the
market value of the SSAS pension fund plus 3 times the
employer's annual contribution plus 3 times the members'
annual contributions but excluding the value of any assets
that are earmarked for a member that has retired or died.
Borrowings must be notified to the IR SPSS except where
the term is less than 6 months and the amount borrowed
is less than the lower of £50,000 or 10% or the
current market value of the SSAS pension fund.
•
Unlisted shares
The trustees of a SSAS
pension fund can purchase up to 30% of the shares in an
unlisted company. They are not permitted to purchase shares
from the members or persons associated with them and therefore
the trustees cannot purchase the company sponsoring the
SSAS. There are also limits on the voting rights of the
shares and the dividends received, this being limited
to 30%.
The PSO have indicated the following as acceptable investments
for a SSAS:
•
Company shares
•
Financial futures
•
Deposit accounts
•
Commodity futures
•
Copyrights
•
Traded options
Prohibited investments
There are a number of investment activities and investment assets
that are prohibited. The SSAS trustees cannot make a loan:
•
To SSAS members or people connected
with the member;
•
To the sponsoring company or associated
company at an non-commercial rate;
•
To the sponsoring company or associated
company unless the loan is used for an approved commercial
purpose;
•
To companies that are insolvent;
•
To keep a failing company
from insolvency;
The IR SPSS prohibits the use of investments as follows:
•
Residential property, unless it is
linked to a commercial property and not occupied by a
member or a person connected to a member;
•
Third party loan, which
directly or indirectly results in the member receiving
a similar loan from a third party;
•
Non-relevant benefits, conferred on
a member as a result of an investment by the SSAS;
•
Purpose of the scheme, where
the IR SPSS believe the investment does not match the
scheme purpose for the members;
The IR SPSS prohibits the following direct investments:
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