Property and Scheme borrowings

The funds in the SSAS can be used to acquire commercial property and certain ‘exempt’ Residential Property.

Commercial Property may include property used by the sponsoring employer’s business, which must then be leased back to the employer at an open market rent.

The advantages of holding commercial property within a SSAS:

• If purchased from the employer it can inject valuable cash flow into the business and the property is protected from the employer’s creditors in the event of insolvency
• Tax relief is received on any contributions used to purchase the property
• Business property can be acquired without direct capital expense to the business
• Costs and payments are payable from the fund › no inheritance tax is payable in respect of the property
• Growth in the value of the property when sold is free of capital gains tax
• Commercial rent, paid by tenants of the property, provides a regular income which is free from income tax
• Rent payable is an allowable business expense if the premises are used for the employer’s own business.

The SSAS can borrow up to 50% of the net scheme assets to finance a property purchase. This means the total value of the Scheme less any existing liabilities

If property is to be purchased from a connected party, such as the sponsoring employer or Members of the SSAS and their families, an independent valuation is required to prove that the transaction will be taking place on ‘arm’s length’ terms. This valuation should be carried out by a Member of the Royal Institution of Chartered Surveyors (MRICS) or a Fellow (FRICS) who is a Registered Valuer.

If the property is to be leased to the employer, the lease terms must reflect commercial terms currently available in the market. An independent rental valuation will be required to support the annual rent and term of the lease.