What is SSAS?
It has nothing to do with elite forces, it’s nowhere near as exciting, but it can be very useful to your business.
SSAS is the acronym for small self-administered pension schemes. Before you yawn and tune out – let’s get to the crux of the matter – they can save you tax and provide cash when you need it.
There are some costs to set up a SSAS, but the benefits are worth it.
Buy your premises
Residential property can’t be placed in a pension, but commercial property can.
If you decide to purchase your own business premises, providing you have enough funds, this is how it works:
- You make a contribution into your SSAS which attracts corporation tax relief
- Your SSAS buys the property
- Your company pay rent to the SSAS
- No tax is payable on the rental as pension scheme income is tax exempt
Then the SSAS invests the rental earnings to generate interest and further gains.
Access cash when you need it
If your company is profitable, but cash flow isn’t always great, a SSAS could be the source of funding for company assets.
Obviously with pension contributions the cash is locked up, but few people are aware that you can borrow money from a SSAS.
You still get tax relief for your pension contributions, but you can borrow up to 50% of the total in the fund. There are provisions, the loan does have to be paid back and there is a maximum repayment term of 5 years. There would also be a charge on it, with a market rate of interest being required, which at the moment would be fairly high. However, if the idea of making a pension contribution to save tax is currently not on the table due to cash flow restrictions this could tip the balance.
Intelligent money management
These strategies are not right for everyone, but for the right businesses they are highly effective ways to use your profits. You’ll need advice to set up an SSAS, but once set up it has long-term benefits.
If you’d like to know more or discuss if it’s the right strategy for your business, give us a call on 01992 554444.
