Using your SSAS to buy your business premises
If you own a business premises such as an office or warehouse, a Small Self-Administered Scheme (SSAS) can be a powerful way to buy or refinance your premises while keeping control and improving tax efficiency. Instead of paying rent to a third-party landlord, you effectively pay it to your own pension for the long term.
At Castri WM Ltd, we believe strategies like this should feel practical, not theoretical, which is why we have used a SSAS structure to acquire our premises in Ashby-De-La-Zouch as part of our long-term planning.
How does a SSAS sale and leaseback work?
In a sale and leaseback, your company sells its trading property, for example, your shop, warehouse or office, to your SSAS at an independently assessed market value. The SSAS becomes the landlord, and your business continues to trade from the property under a commercial lease, paying market rent back into the pension.
The purchase can be funded using existing pension pots transferred, following advice, into the SSAS, new employer contributions (which may be deductible for corporation tax), and up to 50% borrowing of the scheme’s net asset value. In practice, this allows you to unlock capital tied up in the building, while keeping your operations exactly where they are. It’s also important to also remember that SSAS’s are multiple member arrangements, allowing you and your business partners to group together to enable such a purchase.
Tax advantages on growth and rent
Once the property sits inside your SSAS, any future growth in value is sheltered from Capital Gains Tax within the pension wrapper. If the SSAS later sells the building, that gain stays inside the scheme, available to support your retirement rather than triggering a tax bill.
The rent your business pays is usually deductible as a business expense, helping reduce your company’s taxable profits and therefore its corporation tax bill. At the same time, rental income received by the SSAS is free of income tax, so every rent payment is working for your future rather than going to a third-party landlord.
Releasing cash back into your business
For many business owners, the immediate attraction is the cash released when the SSAS buys the property from the company. Those sale proceeds can be used to reduce bank borrowing, invest in stock or fitout, or support the next phase of the business’ growth. It is though important to note that this sale could create a taxable gain and equally SDLT would be payable.
Because the property is now owned by your pension, it is usually ringfenced from the trading risks (a two-year timeframe usually applies here) of the business and held within a long-term, tax-advantaged environment. Meanwhile, your regular rent payments are an offsetable expense for corporation tax purposes and at the same time, steadily build your pension assets.
Is this right for you?
A SSAS sale and leaseback is not a one size fits all solution as there are many permutations that need to be considered. The property must qualify as commercial, the price purchase and rent must be set at genuine market levels, and you need to be comfortable with having a significant pension asset tied up in one building. It is essential to take specialist advice on tax, pensions and legal structuring before you proceed.
If you are an owner managed business and you would like to explore how a SSAS could help you become your own landlord, in the same way Castri WM Ltd has done, we would be happy to talk through your options and help you decide if this type of transaction would fit with your plans.
Important information
This communication is for general information purposes and does not constitute advice on investments, legal matters, taxation or any other matters of investment advice. A pension is a long term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.