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Why Holding Property In A SSAS Can Save Tax
How To Improve Business Cashflow With A SSAS
10 Reasons To Hold Commercial Property In A SSAS
How A SSAS Can Really Benefit Your Family Business
How To Use A SSAS To Pass On Wealth
All About SSAS Sale And Leaseback
How To Fund Your SSAS With £500,000 Now
How To Develop Residential Property With A SSAS
An Innovative And Tax Efficient Method Of Using A SSAS To Fund The Conversion Of A Commercial Property Into Residential Property
Dave runs a property company that develops and invests in residential property.
He has a SIPP that’s mainly invested in stockmarket assets. Its other asset is a small commercial property.
Dave has obtained planning permission to convert the commercial property into residential property. It should be a profitable exercise, but he needs money to complete the conversion.
As a pension scheme can’t hold residential property without incurring a substantial tax charge from HMRC, it needs to be removed before it’s suitable for use as a home.
Dave establishes a SSAS for his company. He transfers into the SSAS the assets in his SIPP, including the commercial property.
As Dave is 55, he decides to draw some tax free cash from his SSAS. He’s entitled to take a maximum tax free cash sum of 25 per cent of the fund value.
Instead of drawing cash, he decides to transfer into his name the commercial property as a tax free withdrawal.
Its value is less than the 25 per cent he’s entitled to draw tax free, which means he can draw a further tax free sum at a later date.
Dave then transfers the commercial property from his personal ownership to his property company as a director’s loan.
To fund the conversion costs, the SSAS grants a loanback to Dave’s company. The loan has to be secured with a first charge and the commercial property is used for this purpose.
Dave’s company pays interest on the loanback to his SSAS. It’s tax deductible in the business, but it’s received tax free in the SSAS, growing Dave’s pension fund in the process.
The conversion was completed and Dave sold the property for a substantial profit.
It was a great result for Dave.
He extracted his commercial property from his SSAS tax free, enabling him to convert it to residential without the worry of HMRC tax charges.
The SSAS funded the conversion costs and made Dave some interest for his SSAS in the process. Dave’s company made a handsome profit on the conversion.
As Dave had provided the company with a director’s loan from his personal resources, he was able to repay that director’s loan tax free.
From the trading profit, Dave made a SSAS contribution from his company. It sheltered the profit in the tax privileged SSAS and reduced the Corporation Tax liability of the company.
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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets
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). However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.
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