SSAS Case Study: Commercial Property SSAS

10 Reasons To Hold Commercial Property In A SSAS

There’s A Lot To Be Said For Buying Commercial Property With The Money In Your SSAS

The Purchase Of Your Business Premises

If you purchase the commercial property from where your business trades, the rent paid by your business reduces its taxable income. 

At the same time, the rent is tax free when it’s received in your SSAS.  Any capital gain in the value of the commercial property will also be free of tax.

As the tenant (your business) and the landlord (your SSAS) are ‘related’, the risk is reduced in both directions. 

The business has a stable landlord (your SSAS) who has no interest in selling up.  The landlord has a stable tenant (your business) in whom it can rely upon to pay the rent.

It’s no surprise the twin advantages of tax efficiency and risk reduction attract many business owners and professionals to use their SSAS to purchase their trading premises.

A Word About SIPP

If you’ve bought commercial property via a SIPP, either with your own SIPP or in conjunction with others who have used SIPPs, you might find that transferring it to a SSAS could be cost effective and more flexible.

Many SIPP operators require you to use their chosen property management company, which can often be expensive.  With a SSAS, the choice is usually yours. 

If you like to undertake the property management yourself to cut out the fees altogether, that’s usually allowed with a SSAS.

The same cost and choice issues can occur with other property aspects, including buildings insurance, valuation fees and legal costs.

A SSAS is one scheme for up to 11 members, with one set of acquisition fees, annual charges and maintenance costs. 

It’s usually significantly cheaper for a SSAS to purchase a commercial property for a group of investors, rather than them each purchasing a share with their own SIPP.

When individual SIPP holders sell their share of the property, or draw benefits at retirement, not only can it be fraught with difficulty, the price achieved may be less than market value. 

A SSAS offers far more flexibility.

The Advantages And Disadvantages Of Investing In Commercial Property

By way of a quick comparison, here are the main advantages and disadvantages of holding commercial property in a SSAS.

10 Advantages Of Commercial Property In A SSAS

  • No Income Tax on rents received
  • No Capital Gains Tax on the sale of the property
  • It falls outside of your estate for Inheritance Tax purposes
  • It’s not accessible to creditors in the event of personal or business bankruptcy
  • Releases capital back into the business to help with cashflow
  • Part or all of it can be sold at any time to SSAS or non-SSAS investors
  • Can be purchased in conjunction with other SSAS members, like work colleagues or family members
  • The SSAS can borrow up to 50 per cent of its value to acquire the commercial property
  • There is no individual or corporate liability on SSAS loans
  • On the SSAS holder’s death, it could be transferred to a beneficiary as a ‘death benefit’

10 Disadvantages Of Commercial Property In A SSAS

  • It can’t be used as collateral for any loans to the business
  • The business in occupation must pay market rent, even if it’s your own business
  • The SSAS administrator is obliged to chase rent, even if it’s your own business
  • Regular revaluations are required which incur cost
  • It may have to be sold at an inopportune time (eg death; to pay retirement benefits)
  • SSAS loans tend to be short term, which can make them expensive
  • Interest on any borrowing doesn’t qualify for tax relief
  • Property expenses will be due, whether or not a tenant is in place
  • If it’s the primary asset of the SSAS, it could leave the investments poorly diversified
  • It’s generally an illiquid asset, which could take months or years to sell at the right price

Please Share This

If you’ve found this page of interest, please would you kindly send a link to it to your friends and colleagues using the buttons below.  You’ll be helping us out, and they might appreciate it too.  Thanks, it's much appreciated.

Share on LinkedInShare on FacebookTweet about this on TwitterShare on Google+Email this to someone
 

AJ Bell Is The Best Value SIPP For Stockmarket Assets

That's our opinion.  Not just because AJ Bell was the first company to offer an online SIPP.  Nor that it's received many prestigious awards.  And not even because the wife of SIPPclub's Founder has an AJ Bell SIPP.  It's because it's one of the most competitive stockmarket SIPPs on the market. 

Over time, charges can wipe out a huge part of your fund.  We like AJ Bell because there are no set-up costs.  If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund.  And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment).

Visit AJ Bell

Get SIPP And SSAS Insights Direct To Your Inbox every Monday (It's FREE!)



IMPORTANT NOTE: NOTHING FEATURED ON SIPPclub IS EITHER AN IMPLIED OR A SPECIFIC RECOMMENDATION TO MAKE, OR TO REFRAIN FROM MAKING A FINANCIAL DECISION.  THIS PAGE HAS NOT BEEN APPROVED AS A FINANCIAL PROMOTION.

As SIPPclub neither advises on, nor arranges, nor recommends specific investments or strategies, we're unable to say whether a SIPP or SSAS or any investment within it is right for you. Ultimately, it’s your money and your decision, and you should only proceed once you're satisfied you've undertaken sufficient due diligence. If you need advice, you should speak to your trusted adviser, or you could find a local adviser from Unbiased.co.uk.  Alternatively, we'd be pleased to introduce to a suitably qualified independent financial adviser.

Please read our full Terms which includes criteria for SIPPclub membership.