SSAS Case study 1

Scenario:

Two company directors owning an equal share in the commercial property they trade from through their individual Self-Invested Personal Pensions (SIPP). Both directors’ families are non-financially dependent and have their own pension plans.

The directors' main financial objectives were to :

• retain the property within their pensions on a long-term basis to provide retirement income after the sale of the business
  
• to ensure that post their deaths the pensions are passed on to their families within a pension scheme.

Recommended solution:

We recommended each director transfer their SIPP to a Family SSAS adding their spouse and children as members. Each SSAS continued to own the property in equal shares.

Benefits:

• Rent continued to be received tax free.
  
• Full flexibility when drawing benefits.
  
• Member can now leave residual pension fund to family tax free.
  
• No need to sell any of the assets held in the pension post death.
  
• No need to set up any additional pension plans to receive death benefits.
  
• Widow and children may have access to tax free income post members death.
  
• Clean, simple and tax efficient.

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SSAS Case study 2

Scenario:

Bill and Shirley run a successful and profitable food and beverage business. The business trades from a commercial property owned personally by Shirley valued at £250,000. The rent of £20,000 that Shirley receives is taxed at her highest marginal rate, and there has been no real increase in the value of the property since it was purchased.

Bill and Shirley both have personal pensions but have not made contributions for several years and as a result these have little value.
Their accountant advised them that Shirley should transfer the property into the company. This created a positive director’s loan (DLA) account for Shirley however it meant that all rental income and capital growth from the property would suffer corporation tax and potentially an inheritance tax liability on death. Their main financial objective was to build up tax-efficient retirement funds for each of them utilising the property, which was the company’s main asset.

Recommended solution:

We set up a SSAS for each. We recommended that the company make an in-specie contribution of the property to their respective SSASs utilising their current year and three previous years unused carried forward pension allowance. The full value of the property transferred attracts corporation tax relief for the company.

Benefits

• Positive DLA saves Shirley income tax of circa £76,500.
  
• Corporation tax saving of £50,000.
  
• Bill and Shirley use up £125k of unused pension carry forward relief.
  
• The property is now creditor protected in the pension.
  
• The rent is received tax free in the pension saving 20% corporation tax.
  
• The property is outside of their estate for Inheritance Tax saving 40% on death at current rates.
  
• Bill and Shirley can also add their children to the SSAS so that they can inherit the pension fund and maintain the tax-free status of all the investment assets.

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SSAS Case Study 3

Scenario:

Charles runs a successful accountancy practice. An opportunity has arisen to acquire clients of another local accountancy firm as the owner is retiring. Charles is looking at finance options to help with the acquisition. Charles has a SSAS and was keen to explore how the pension fund could assist.

Recommended Solution:

We negotiated with the Trustees of the SSAS that they would provide Charles with funding of £200,000 utilising the Scheme Debt option. The repayment of the debt was agreed over 10 years at an interest rate of 3% over Bank of England base rate. This met all the regulatory lending requirements in accordance with HMRC rules.

Benefits:

• Charles was able to inject funds into his business allowing him to acquire the new practice. The result was a substantial increase to his annual net profits.
  
• The increased profit allowed Charles to repay the debt earlier than the intended 10 years.
  
• The interest payments increased the value of his pension.
  
• The interest payments benefited Charles and not an external lender.
  
• The increased profit allowed Charles to make additional pension contributions which also helped to control the amount of corporation tax his company paid.