Tag: Coronavirus

A SSAS could be the answer to cash flow needs

SSAS – what it is and can you transfer to one today?

A SSAS is a small, self-administered pension schemes (SSAS) for up to 12 members. 

Right now you can transfer any existing pension into a SSAS, where the combined funds can be used to borrow money, up to 50% of the fund value (if needed) to buy back premises owned by the company, releasing funds to clear other debts or to finance projects (e.g. new business opportunities that have arisen out of the current situation as businesses adapt to new areas). With many companies using the loanback facility to get access to extra funds for pressing cash flow needs. 

This loanback facility that is incorporated into all SSAS has been responsible for a dramatic increase in SASS activity over the past few weeks.

According to The Whitehall Group, one of the leading SSAS providers, reported SSAS registrations increasing eightfold in just the first ten days of April 2020, compared to figures for January earlier this year. 

It’s the loanback facility that is so appealing

With borrowing rates for a SSAS at incredibly low levels, companies who have assets or properties in their SSAS are utilising them as security to borrow against, as they realise much needed cash flow for their companies. 

With more and more business owners realising that their own SSAS could provide a low-cost lifeline to keep their businesses afloat during the Covid-19 economic crisis. 

How your SASS could save your business

SSAS can work for your business in many different ways. It can provide loan finance back to the business of up to 50% of the total amount of the net market value of the business SSAS scheme’s assets, as well as 50% of the total amount of cash held.

That kind of cash injection, borrowed against rock-bottom interest rates, is providing the financial lifeline that many businesses so desperately need. With the number of loans reported having quadrupled in April, compared to January’s activity. 

A word of caution

This sudden increase in SSAS activity is a reversal of recent year’s trends, which saw the popularity of SSAS schemes decline, as they are not regulated under the Financial Conduct Authority rules and protections. 

As such a SSAS should be considered carefully and regard should be paid to the wider aspects of the scheme. Your SSAS shouldn’t just been viewed as a low cost route to answering any current and pressing borrowing needs. In fact, any loans made in a SSAS scheme should always be to ensure that the company doesn’t just survive, but also goes onto grow in the future. 

There is also an obligation by the trustees of the SSAS scheme that they do not risk pension money that is intended for retirement. Therefore proper consideration should always be given to determining if the loanback is a good investment for the pension scheme to make. 

Done properly it could be a cash flow lifeline

Although loanbacks are currently a very enticing selling point, any SSAS must be executed properly, or it runs the risk of its members losing out. HM Revenue & Customs have stated that any loans made to the sponsoring employer will qualify as an authorised payment if their key stipulations are adhered to, including:

  • A five year minimum term
  • Interest rates must be at least 1% above the current base rate
  • The loans must not exceed 50% of the SSAS’ net assets.

It’s important that trustees follow procedure and document the loanback correctly. Failure to ensure that the correct securities are in place could mean that the loan will not qualify as a loan. Instead it becomes viewed as an unauthorised payment and will incur tax charges. 

If you are in any doubts regarding the trustees obligations, or how to administer the loanback correctly talk to professional financial advisers like us, to ensure you don’t fall into any of the many pitfalls that can await unsuspecting trustees.

If you need the SSAS lifeline – act now 

The world seems full of endless financial delays during this Covid-19 downturn. Banks are taking longer to process loan applications, charging increased interest rates and asking for personal guarantees.

However applying to switch an existing pension to SSAS, or to set a SSAS up from scratch also takes time. HMRC have to accept and register a new SSAS before any money can be transferred or paid in. So the sooner you start the process, the sooner you can take advantage of the unique facilities of your SSAS. 

Remember – we’re always happy to help

As always, were here to help, whenever you need us. If you do have any further questions regarding anything I’ve raised in this blog, then please get in touch with us at Bridgewater Financial Services, where we will be delighted to help guide you through your individual options and strategies.

The 2020 Budget and what it means for you

Rishi Sunak delivered not only his first budget, after finding himself in the position of Chancellor of the Exchequer, but it’s also the Government’s first budget since winning the General Election and leaving the EU. All alongside the growing threat from coronavirus.

Hailed by the Chancellor as “the budget of a Government that gets things done” and widely seen as a change of direction from the traditional fiscal approach of established Conservatism.  

So now the dust has settled, what does it all mean for us? 

Important points for high earners
SAVINGS: In the Finance Bill 2020 the government will set the 0% band for the starting rate of savings income. This means that the rate will remain at the current value of £5,000 for the whole of the UK for 2020 – 2021. 

PENSIONS: The two tapered annual allowance thresholds for pensions will both rise by £90,000. From 6 April 2020 the minimum tapered annual allowance will decrease to £4,000 (down from £10,000). From 2020 onwards the threshold at which an individual is assessed for taper will be £200,000, with the point at which your annual allowance begins to reduce being £240,000. 

Important points for business owners
CAPITAL GAINS TAX: The Finance Bill 2020 will reduce the lifetime limit on gains that are currently eligible for Entrepreneur’s Relief, down from £10 Million to £1 Million for all qualifying disposals made on or after 11 March 2020. 

CORPORATION TAX RATES: The Corporation Tax main rate from April 2020 will stay the same at 19%; with this rate being set in legislation in the Finance Bill 2020.   

ENTREPRENEURS’ RELIEF:  Entrepreneurs’ relief is viewed by the Chancellor as ‘expensive, ineffective and unfair’ with three quarters of the relieve going to just 5,000 people. Which is why Rishi Sunakstated that he wishes to make changes to entrepreneurs’ tax relief, rather than abolish it altogether, as he said that he ‘did not want to discourage genuine entrepreneurs’. As such, he is reducing the lifetime limit for relief from £10m to £1m.  

This reform is set to save around £6bn over the next five years, with around 80% of small businesses going unaffected.

Important points for non-residents purchasing UK property through companies
The 2019 Finance Act legislated that non-UK resident companies that operate a UK property business, or have other property income will now be charged Corporation Tax on property income or profits, rather than these charges being levied as Income Tax. Following the budget, the Finance Bill 2020 will ensure that these measures and changes are smoothly implemented and that the transition of the taxation of UK property profits from Income Tax to Corporation Tax delivers a more equal playing field for UK and non-UK resident companies alike.  

Non-UK RESIDENT STAMP DUTY: As promised in the 2018 Budget, and following a consultation, there will be a change in Stamp Duty Land Tax surcharge on non-UK residents purchasing residential property in England and Northern Ireland. The Finance Bill 2020-21 will introduce a 2% surcharge to take effect from 1 April 2021. 

For the avoidance of doubt, if contracts are exchanged before 11 March 2020 but complete or are substantially performed after 1 April 2021, then transitional rules may also apply. 

Other general but important points
INDIVIDUAL SAVINGS ACCOUNTS (ISA) & JUNIOR ISA’s: The adult annual ISA subscription limit for 2020 – 2021 will remain unchanged at £20,000. Where there will be an increase to £9,000 in the annual subscription limit for Junior ISAs. Both of these measures will apply to the whole of the UK. 

CHILD TRUST FUNDS: The chancellor announced an increase to £9,000 in the annual subscription limit for Child Trust Funds for 2020-21. This measure will apply to the whole of the UK. 

LIFETIME ALLOWANCE FOR PENSIONS: The on going Consumer Price Index (CPI) increase in the lifetime allowance for pensions will increase in line with CPI, rising to £1,073,100 for the tax year 2020 to 2021.  

PERSONAL TAX: The personal tax allowance remains at £12,500. Whilst the threshold for National Insurance contributions will rise from £8,632 to £9,500. This should remove 500,000 of the workforce from NI tax eligibility.  

VAT ON SANITARY PRODUCTS: The 5% VAT levied on women’s sanitary products will be scrapped. 

PLASTIC PACKAGING TAX: A £200 per tonne charge will be levied on all manufacturers and importers on any packaging made of less than 30% of recycled plastic. 

VAT ON DIGITAL PUBLISHING: The chancellor will abolish all VAT on digital publications including books, newspapers, magazines and academic journals from 1 December. 

Alcohol, Tobacco and Fuel
ALCOHOL: All duties on spirits, beer, cider and wine have been frozen. 

TOBACCO: Tobacco taxes will continue to rise by 2% above the rate of retail price inflation. This will add 27 pence to a pack of 20 cigarettes and 14 pence to a packet of cigars. 

FUEL: Fuel duty has been frozen for the 10th consecutive year. 

Any questions? Please get in touch
As always, were here to help, whenever you need us.

If you do have any questions regarding anything that the chancellor has changed or mentioned in his budget, or any points I’ve raised in this blog, then please get in touch with us at Bridgewater Financial Services, where we will be delighted to help guide you through your individual options and strategies.

 

 

 

The CORVID 19 GOLD RUSH

Please be mindful of my recent blog on the bandwagon effect http://bridgewaterfs.co.uk/2019/12/13/2019-election/well now seems the perfect time to re-stress some of the principles that I mentioned in the blog. Especially given the very real panic that Corvid 19 is causing both in the real world as well as the financial markets.

Specifically I want to address the recent activity in the Gold Market that has seen prices soar, as investors move assets into the perceived safety of this form of asset. 

Why it’s not the right time to buy gold

The price of gold has just halted as investors who were in for the longer term are taking their profits now. However with the traditional jumping onto the gold bandwagon in times of market volatility, for the normal investor there probably won’t be any killings to be made.

There is in fact, a real danger that you’ll be jumping to gold at or near to the top of the market. Meaning that unless you’re investing vast amounts into gold, there maybe little return to be made. Plus you have the very real concern of the journey back down, as the price of gold more properly reflects its place in the grand scheme, once the markets recover – and recover they will.

 

It might be the right time to consider selling

If you’re currently in the gold market and have been prior to the Corvid 19 prompted Gold Rush, then you may well be in a position where selling your investment could result in a higher than expected return. Especially as those desperate to hop onto the bandwagon are still keen to buy your gold at the current inflated market price.

 

Markets are in it for the long term

You should be too.

There have been many triggers for a run on the gold market over the past few decades. Investors get spooked as they know that the markets hate uncertainty; and pandemic viruses spread uncertainty as fast as they spread panic.

The tourist industry suffers, large-scale events get cancelled and the crossing of borders with people and goods becomes difficult or impossible.

All of this has the effect of depressing the markets and causing many of the larger investors to opt out of their usual activities. Hence they buy gold, or other ‘safe’ commodities, and sit the storm out.

They know that the storm will blow itself out, because it always does. They also know that when they get their timing right and return to the investment markets, they’ll be able to buy back in at an advantageous price. With this rush back to the investment markets driving values back to the levels they were prior to abandoned them to buy gold in the first place.

 

Ask any comedian and they’ll tell you it’s all about timing

However, abandoning the investment market in favour of the gilt-edged bandwagon could mean that the joke’s on you.

There really is no need to panic or react, as the markets always return to normal, once whatever it is that it making them jumpy passes.

Trust the past, because the one thing history has taught us over and over again, is that these things blow themselves out. Just like they did when SARS (2003), Swine Flu (2009) and Ebola (2014) caused similar panic selling.

In fact, the only time to ever change your direction of portfolio, is when your end destination changes, not because of any temporary bumps in the road.

 

A calming influence over troubled waters

As always, were here to help, whenever you need us. If you do have any further questions regarding anything I’ve raised in this blog, then please get in touch with us at Bridgewater Financial Services, where we will be delighted to help guide you through your individual options and strategies.