A manufacturing company used a SSAS to purchase its own factory, generating pension growth and eliminating rent.
Key Numbers
£420,000
SSAS contributions accumulated
£180,000
SSAS borrowing to complete purchase
£600,000
Property purchase price
£48,000
Annual rental income now in pension
£680,000
Property value 2 years later
£80,000
Capital gain sheltered from CGT
The Challenge
The company was paying £48,000 per year in rent on its factory premises. The landlord indicated the property would be sold. The directors wanted to buy the property but did not want to use company funds or personal borrowing.
Our Approach
TLPI established a SSAS for the three directors with combined pension contributions of £420,000 accumulated over 3 years. The SSAS then borrowed an additional £180,000 (within the 50% of net assets limit) to make up the £600,000 purchase price. The company continued paying rent — this time to the SSAS.
The Outcome
The directors now own their factory through their pension scheme. The £48,000 annual rent payments now accumulate within the pension, tax-free. The original business property was independently valued at £680,000 two years after purchase, with the £80,000 gain sheltered from CGT.
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