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Since April, people have been able to pass their unused defined contribution pension to any nominated beneficiary when they die rather than paying a 55 per cent tax charge.
Experts agree, “holding commercial property within a SSAS has now become more favourable as the property, within the SSAS wrapper, can be passed on to any nominated beneficiaries on death without needing to sell it by way of beneficiary’s flexi-access drawdown.”
If you’ve got succession planning in mind, particularly for family businesses, then some new pension provisions could help in several ways. Provided that regular contributions are being made, commercial property can be acquired by the pension. This can go a long way towards contributing to the retirement income requirements of a family member making way for the next generation.
SSASs can invest in commercial and industrial property whether situated in the UK or abroad. Commercial property of any kind can be a useful planning tool when leased to the family company.
The company obtains tax relief on the rent it pays and the rent received by the SSAS is tax free. Income tax will be suffered when a pension is drawn but the tax is deferred and could be at a lower overall rate. The purchase may be funded from new contributions, borrowings or transfers from other pension schemes.
Because a SSAS is free of Income Tax on the rent it is more efficient when using a loan to purchase a property as the rental stream can be used directly to reduce a debt. An individual would have to pay Income Tax before reducing the debt.
The ownership of the property by the trustees protects it from any liquidator of the business. If commercial property is leased to a connected company, it must be on fully commercial terms, otherwise a tax charge will arise on the members on the value of the “benefit” so enjoyed.
Understanding pension planning can be daunting. With the right guidance, the latest regulation changes can be used to help your business, and ultimately, reduce your tax bill.
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