Can I use my company pension contributions to buy the commerical property?
If you get an opportunity to buy the premises from which you operate, then this can be an opportunity not to be missed. There are many practical advantages of being your own landlord, but if done in the correct way then there can also be significant tax advantages as well.
For example a £100,000 pension contribution would save £20,000 of corporation tax at the small profits rate (taxable profits up to £300,000), £26,000 at the main rate (for taxable profits greater than £1.5m), or £27,500 at the marginal rate (taxable profits between £300,000 and £1.5m).
The pension contributions have to be paid into a Self Invested Personal Pension (SIPP) rather than to more mainstream large pension companies. SIPP’s tend to be made available by specialist pension fund providers. The SIPP will have an administrator to oversee things.
Typical costs for the set-up of a SIPP are around £500, and also you can expect to pay at least £500 in administration fees. These costs will obviously vary depending upon the size and complexity of the scheme.
If you already own the property personally, or possibly the company already owns it, then the SIPP can still buy the property from you.
In summary you can use tax deductible payments from your company to fund a SIPP, which then buys your own premises, and then the tax deductible rental that your company pays goes to further fund your own pension. You therefore have control over the pension payments, you know who both the tenant and landlord are, and consequently you are in total control of your own pension arrangements. On the one hand you are putting all your eggs in one basket, but with the ever increasing pension age, and the potential for less support from the State in the future, this is a golden opportunity to take control of one part of your own destiny.
