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

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