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SSAS Case Studies (Small Self Administered Scheme)

March 09, 2009 at 9:14 PM

Scenario one:tax.gif

Jane runs a small retail business and her company owns the premises that she operates from, having repaid the commercial mortgage a few  years ago. The value of the premises is estimated to be £75,000 and Jane has about £100,000 in pension funds. She knows her business has real potential but the current climate means she really needs a cash-injection into the business to start investing in marketing and PR to boost sales. She is currently debt-free and wants to remain this way, therefore borrowing the money isn’t an option.


The Wow Solution:

Jane can transfer her pension funds into a SSAS (Small Self-Administered Scheme) so that she has about £100,000 in the SSAS bank account. Jane can then elect to purchase the commercial property from her business. The SSAS will then pay the business £75,000 for the premises  and will become the registered owner. The business will benefit from a cash injection of £75,000 (less any corporation tax on any gains on the property). However it will have to start paying rent to the SSAS, at a commercial rate  immediately. Jane is happy with this, as the rent is being paid directly into her pension fund and is also treated as an expense of the business and  therefore gets corporation tax relief.  This means Jane is extracting money from the business in a very tax-efficient way. It also means Jane has the required funds in the business to invest into Marketing and PR which will help her to grow the business. Furthermore, now that the premises are held within the pension fund, there will be no capital gains tax to pay on any gains when the property  is eventually sold. Nor is there any tax to pay on the rental income received.

We work with SME’s to provide pro-active tax-planning solutions, to not only reduce their tax liabilities, but also provide innovative financial planning ideas that help finance the expansion of their business.

Wow can discuss the suitability of this scheme for your business in a complimentary Financial Planning consultation, please call 0845 201 1582 or e-mail info@thewowcompany.com 

 

Scenario two:

Steve is a director of an engineering firm and he has about £80,000 in his various pension funds. He needs £25,000 to purchase new equipment that he believes could take his business on to the next level. Steve could go to the bank for a loan, however lending is quite strict and commercial rates are fairly high at present. He could also re-mortgage his house, or take out a personal loan and inject these funds into the business personally. However he would pay tax on any interest the business pays him and he would personally have to pay interest to the lender. Furthermore, if the company purchased these assets, and then the business subsequently became insolvent, the new assets can be claimed by the creditors of the business.


The Wow Solution:

Steve can use his accumulated pension funds to create a SSAS (Small Self-Administered Scheme) and the SSAS can then lend the £25,000 to the business to purchase the new equipment. A commercial loan agreement is drawn up between the scheme and the business and the scheme has first charge over the assets (so they cannot be claimed by creditors). The scheme agrees a rate of interest of 3.5% above base rate which the company has to pay directly into the SSAS. The  company can get corporation tax relief on the interest payments and the  scheme does not have any tax to pay on the interest payments received. This is a highly efficient form of lending as the loan comes  from untaxed income and the interest on the loan is paid into the pension fund and is free of any tax.

We work with SME’s to provide pro-active tax-planning solutions, to not only reduce their tax liabilities, but also provide innovative financial planning ideas that help finance the expansion of their business.

Wow can discuss the suitability of this scheme for your business in a complimentary Financial Planning consultation, please call 0845 201 1582 or e-mail info@thewowcompany.com



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