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22 August 2009

BUSINESS OWNERS PURCHASE PREMISES THROUGH PENSIONS

It was a basic tax planning strategy for many owners of business properties to purchase their premises through their pension schemes. The pension vehicle is usually a self invested personal pension (SIPP).   The main driver for this was that both the growth in capital values of these properties and the rental payments were tax free.

Following the “A” day proposals on 6th April 2006 the ability to set up and administer SIPPs became easier although the borrowing potential from the SIPP is now much reduced being 50% of the pension fund rather than 75% of the value of the property which was the case before.

Since 2007 commercial property has slumped 40% although more recently the fall is slower. Capital values for the sector were down just 0.13 per cent in July. Standard Life which has 1,000 properties held by clients via SIPPs suggests that while confidence is returning it will be some time until returns improve significantly.

Currently, one potential positive side effect coming through the recession is that selling the business property to the pension scheme can release much needed cash for the business. The property value may have fallen to such a level that the purchase of it from the pension fund is now viable and the future growth of the property is tax free within the pension fund.

IF YOUR COMPANY HAS CASH FLOW PROBLEMS AND YOU HAVE THE ABILITY FOR THE PENSION FUND TO PURCHASE THE BUSINESS PREMISES PLEASE CALL 0207 636 2430 WHERE ONE OF OUR TAX ADVISERS CAN ANSWER YOUR QUESTIONS.

WE ALSO PROVIDE FREE CONSULTATIONS ON CASH FLOW MANAGEMENT FOR THOSE COMPANIES THAT ARE HAVING DIFFICULTIES DURING THIS TOUGH ECONOMIC PERIOD