This is a question we get asked on a regular basis. In response we have put together this case study to highlight the potential advantages of following this route.
It is particularly useful if you are an owner of a small to medium sized business. You can buy your business premises through your pension funds, meaning your company is paying rent to your pension instead of to a landlord.
PLEASE NOTE THIS CASE STUDY REFERS TO A SIPP, HOWEVER THE SAME THEORY ALSO APPLIES TO A SSAS.
James, aged 42, is the managing director of his own business. His firm has seen strong growth over the past 5 years and he now needs larger premises.
Additionally, he is becoming increasingly frustrated with the amount of tax his business is paying.
He currently rents a small unit on an industrial park and is keen to purchase his own commercial property to trade from. After finding a suitable property, James contacted Boolers to discuss the options available to fund its purchase.
James’ personal details
Property purchase details
James has not paid much attention to his pension over the years, but has recently heard about SIPPs from a friend. He likes the idea of having greater control over his pension and using it for a commercial property purchase to utilise within his business.
VAT may be payable on the purchase of commercial property. Please see our separate notes on this, found at the end of the case study.
With the advice of Boolers, James sets up a SIPP, which helps fund the building purchase with his forgotten pension.
If you require further information, please contact us:
Telephone: 0116 2407070
This case study is for illustrative purposes only and is only an example and should not be construed as advice or guidance. It is based on our understanding of current taxation, law and practice (July 2016), which is subject to change. Before undertaking any transfer of pension benefits a full review is required, to ensure that valuable benefits are not lost and that this is a suitable transaction.
VAT on commercial property purchases
Whether a commercial property has elected to waive exemption to VAT (i.e. Opted to Tax) will often not be known until the particulars of sale are received, or confirmation received from the vendor.
It is possible for a SIPP to register for VAT, which will be undertaken by the Trustees or the member’s accountant. The VAT returns are completed by or on behalf of the property manager.
If VAT is paid on purchase, the SIPP can reclaim this VAT. The amount reclaimed can be used to help repay any SIPP borrowing.
Please note, if the property has Opted to Tax, Stamp Duty will be paid on the value of the property including VAT.
As VAT is a complex area of taxation, we will always seek VAT advice when purchasing property as we are not VAT experts.
“At Boolers, you know that things will be dealt with properly and professionally. A real safe pair of hands!”
“I have always found the quality of advice, technical knowledge and level of service is second to none. ”
“Thank you to all of you for such a wonderfully smooth transaction! Hope we can do it again some time.”
“Boolers provided excellent advice when we needed it most.”
“Boolers have provided myself, family and business with pension and investment advice for over 30 years and continue to provide a high quality professional service to us all on an ongoing basis.”
“Chris Ball has been our Financial Adviser for many years and, from the start, we have been impressed with his strategic sense, his deep knowledge and his skills in helping us build our own successful retirement. He understands our aims and how to achieve them and has taken great care of us throughout. ”