.. a massive opportunity for your SSAS Pension.
There are some remarkable changes coming our way with regard to planning and building permissions for the conversion of commercial property to residential.
As we all know your small self-administered pension scheme (SSAS) is an ideal vehicle to purchase, develop and own commercial property; with some remarkably advantageous ways of funding potential purchases of commercial properties.
We also know that your SSAS isn’t allowed to hold residential property, but did you know that it is allowed to pay for any conversion from commercial to residential?
Meaning that, you can purchase commercial property with your SSAS, flip it to residential and develop it within the SSAS. Just as long as the property is removed from the SSAS Pension BEFORE it becomes habitable. For the avoidance of doubt, ‘habitable’ is defined as the point of which the certificate of habitation / completion is issued.
There are some VERY BIG changes coming to commercial property planning restrictions
In order to get the economy moving again, the Prime Minister has announced his ‘New Deal For Britain’. Within it are some remarkable opportunities for companies to utilise the power of their SSAS pensions, by developing commercial property for residential sale.
This September, we will see some of the biggest changes in planning regulations that have ever impacted upon the commercial property market.
If you have a SSAS pension, you could be perfectly placed to take full advantage of these. As of September this year a reform of the current system will introduce the following changes:
- A vast amount of existing commercial property will be allowed to change its use to residential without the need for a planning application
- Land and existing commercial buildings in town centres can change use without planning permission
- Planning permission will no longer be required for the demolition and rebuild of vacant and redundant residential and commercial buildings, as long as they are rebuilt as homes
- Commercial premises, including vacant shops, can be more easily swapped to residential housing
- Far more types of commercial units will have the flexibility to be repurposed through the reform of the User Class Order.
This is a fundamental changing of the rules around converting commercial property to residential and this can be done advantageously through the use of your SSAS pension.
However the rules governing what you can and can’t do must be closely followed, or you’ll run the risk of exposing the SSAS to draconian taxes on the profits that your property dealings create.
To avoid unwanted taxes there are a few simple things you can do to ensure that things go as smoothly and as tax efficiently as possible:
- Make sure that your SSAS sells the property to a cash buyer prior to the conversion to residential completing. This means that the completion then takes place outside of your SSAS
- You can leave the capital appreciation inside the SSAS and avoid Capital Gains Tax if existing SSAS members, or a sponsoring company, purchases the incomplete property form the SSAS at market value. They can then finish the project and sell it, paying only the stamp duty and legal costs
- The SSAS can even sell the uncompleted property subject to a deferred consideration contract. This way the property is removed from the SSAS before completion, but the buyer doesn’t have to pay the full purchase price over until the conversion is complete and they can then apply for a mortgage
- A great way of ensuring that any property in question qualifies as a genuinely diverse commercial vehicle, and therefore unaffected by the normal residential property rules, is for a number of independent SSAS’s to come together in order to carry out bulk projects
- Another way to not get taxed for converting or building is simply don’t convert or build. A SSAS can buy and demolish commercial property and then sell the land to a developer for a commercial gain
- You can also take advantage of any 12 month loan window available by getting the SSAS to lend up to 50% of the funds value in order for the sponsoring company to purchase or convert the property; and repay the SSAS upon the completion of the sale.
There are all sorts of opportunities to take advantage of these coming changes with a SSAS Pension. If you don’t currently have one, then perhaps now’s the right time to convert an existing scheme to a SSAS, or set one up.
Whatever you are thinking, now is the time to act as it can take up to three months to get a new SSAS registered by HRMC. Especially as many of their staff have been moved to other departments in order to handle the furlough scheme.
If you are thinking about setting up a SSAS, in order to take advantage of these new changes in property legislation when they kick-in in September, then please get independent and professional advice.
Doing things right from the very start will save an awful lot of hassle and expense further down the line. Especially with something as complex as a SSAS Scheme, where the wrong advice, or no advice at all, could result in significant tax penalties.
As always, we at Bridgewater Financial Services are here to provide expert and independent advice on any questions you have regarding a SSAS pension, or any other financial enquiries you may have.