A Real Life Example

A small Kent consultancy company rented its offices. As the business grew, the director, Tanya, was on the lookout for more space. When the unit next door became vacant, Tanya made enquiries to the owner, who, coincidentally, also owned the freehold of the unit Tanya's company was already renting. With a philosophical preference for purchasing property rather than renting, Tanya enquired as to whether the units were for sale.

A price was agreed and the legal process begun. But Tanya's company was small and committing all the working capital to the purchase would have made cash-flow precarious. Tanya remembered that she had heard something about pension schemes being able to purchase property so she spoke to The Harvest Partnership who set up a SSAS into which Tanya's personal pensions were transferred. Furthermore, as the unit into which Tanya's company had first moved was sub-let from a company which had previously paid rent on the unit for eight years whilst it was empty, they were also able to negotiate a reverse premium for the surrender of the lease. That amount, together with the transferred personal pension plans, amounted to sufficient deposit. The total amount contributed also defined the amount of borrowing the SSAS could undertake as comfortably in excess of the amount required to purchase the property.

Now when Tanya retires, the rental income paid by the company to the trustees (Tanya and husband, Mike) would not be liable to income tax. Furthermore, the rent paid by Tanya's company is an allowable expense against Corporation Tax. At the time of Tanya's anticipated retirement the mortgage on the premises will have been paid off and further significant contributions over the years have reduced her company's Corporation Tax bill whilst the facility to borrow money from the SSAS to fund business development (up to 50% of the net scheme assets) has proved a lot cheaper than borrowing from the bank!