For the SME owner, a pension need no longer be a burden but can become an aid to business growth.
In the past, the mere mention of pensions would have business owners yawning and wanting to change the subject quickly. However, with the advent of Auto Enrolment (workplace pensions) and recent legislative changes bringing flexibility to pensions, astute business owners are now considering all their pension options. This is because as well as providing retirement income, some pensions can offer great planning opportunities today.
The most flexible of all pensions is the Small Self Administered Scheme (SSAS). This pension was designed by the government specifically for small businesses. SSAS are HMRC approved, and have a host of features that make them attractive to businesses and their owners.
It is not possible to cover all aspects of SSAS in this article, but here are a few key features that are of interest to most business owners:
It is possible for a SSAS to lend up to 50% of its net assets back to the associated company. This means that business owners can make contributions into their pension, secure in the knowledge that if in future years their business requires cash flow then their pension is able to provide it. Alternatively, many business owners also have pre-existing, more traditional pensions. By transferring that pension into a SSAS they could provide a simple form of flexible funding.
Contributions and Advanced Contributions
As well as being able to take standard contributions (up to £40k per employee), with a SSAS the company can make a contribution that is an allowable expense for Corporation Tax purposes of up to £500k per year. This can be of great benefit to profitable business, and is a feature unique to SSAS.
There are two main areas of benefit to having commercial property in a SSAS:
1. Security – because the SSAS is a trust, if in future the company experiences financial difficulty then creditors could not take possession of this asset
2. Tax – there are many tax benefits from having commercial property in a SSAS, including:
SSAS also bring lots of simple planning opportunities for commercial property.
They can reduce the effective purchase price by 19%; quite simply, if a business contributes cash to a SSAS this is an allowable expense for corporation tax. When the SSAS has the funds it can then purchase the property.
N.B. it is also possible for a SSAS to borrow funds to help the purchase.
SSAS can produce significant tax reliefs - If a business currently owns commercial property, it can be contributed to the SSAS, and this will create corporation tax relief to the value of the property. If a business owner personally owns commercial property, this can also be contributed to the SSAS via their limited company; this produces both personal and corporate tax reliefs.
Hopefully, the details above highlight that SSAS are not only effective retirement plans, but when used effectively can enhance the financial position of a company and its owners.
SSAS Advisers offer a unique consultancy and implementation service that involves consultation followed by an underwritten advice note.
Our experienced team consists of consultants who interface with business owners and their Advisers. We also have an experienced back-room technical team that consists of pension experts, chartered tax advisers, pension lawyers, and a corporate trustee.
Please note: All applications of SSAS have rules and conditions attached, please contact SSAS Advisers to discuss your specific requirements.
Terry Dunbar, Director, SSAS Advisers Ltd
0191 580 1286