Case study – Warehouse purchase
31/07/2024
Background
Robert, a director of a clothing and shoe wholesaler in Lancashire, wanted to use his retirement savings efficiently to boost his fund, ensure steady income, and release cash for business improvements. His financial adviser recommended opening a SSAS and transferring his pension to purchase commercial premises.
Objectives
Robert aimed to use his pension fund to buy the business’s warehouse, generating rental income, protecting the property from tax on capital growth and releasing cash to his business. He also wanted to protect the property from creditors in case of business difficulties.
Property and Valuation
The warehouse, a modern industrial unit, was valued at £750,000 with a rental value of £70,000 per annum. Registering the SSAS for VAT avoided additional VAT costs by ensuring the transaction qualified as a transfer of a going concern.
Borrowing
With a pension fund of £600,000, Robert needed additional funds for the purchase. His financial adviser organised a £200,000 loan to the SSAS from a commercial lender, to be serviced by rental income.
Timeline
- 26 Oct 2023: Initial query and property questionnaire received
- 23 Nov 2023: Solicitors appointed
- 7 Feb 2024: VAT registration granted
- 28 Feb 2024: Lender appointed
- 8 Apr 2024: Contract pack received
- 24 Apr 2024: Searches received
- 30 Apr 2024: Completion
Additional Information
Robert’s SSAS bought the property from his company, requiring an open-market valuation. The business pays £70,000 rent annually to the SSAS. Robert maximised his pension fund through employer contributions and unused annual allowances.
Benefits
The purchase allowed for tax-free growth on rental income and future property value. Contributions to the SSAS reduced the company’s corporation tax. The property is protected from creditors, and the company received £750,000, aiding its trading strategy. No VAT on the purchase saved £150,000. The property provides a steady income stream, is expected to appreciate in value and the SSAS can be passed on to his beneficiaries tax-free on Robert’s death.
Conclusion
Acquiring the commercial property for Robert’s retirement plan provided business cash flow, steady income, and potential for capital growth. This approach offers investment control, aligning with pension planning objectives and enhancing the SSAS fund’s financial security and growth.
To find out more about commercial property purchase, please read our Property Guideline or contact our team.
