Buying Commercial Property in Berkshire
Many business owners would like to buy a Commercial Property in Berkshire, so that either their company can occupy it, or simply as an investment.
There are a variety of purchase options available to them:-
- The company could buy it and so it would appear in your company balance sheet.
- You could buy it personally and the company could pay you rent.
- Your Self Invested Personal Pension (SIPP) could buy it
- A Small Self-Administered Scheme (SSAS pension) could buy it
You may have chosen to purchase your own business premises rather than continue to rent because it will give the business greater security of tenure, rent would continue to be a deductible business expense.
1 Company Purchase
This is easy to do, the advantages are: that it is easy to arrange and will often get the support of the Business’s Bank.
In addition, the company would not have to pay rent, so this option is good for cash-flow.
The disadvantages are twofold.
Firstly, if your business fails, you could lose both the value of your business and the value of your premises.
Secondly, when you come to sell your business, you may be offered less money for the combined value of both business and premises than you would otherwise get selling them separately.
2 Personal Purchase
Some clients prefer to own a Commercial Property themselves and arrange for the Company to pay them rent. Issues:
- You are likely to lose Entrepreneur’s Relief as this would be treated as an “Associated Company”
- This would increase your personal income tax liabilities
- You may not have the capital required to for a deposit and all associated expenses.
Preferable routes that are more tax-efficient are to use either a SIPP or a SSAS.
Benefits of your pension(s) owning the property,
- Rent is paid to the pension from an Internal Asset and does not affect your Annual Allowance for maximising contributions to your pensions
3 SIPP Pension purchase
SIPPs are normally established under a Master Trust, so it is more complex to purchase property than through a SSAS.
4 SSAS Pension purchase
This is very flexible route. The problem with buying through a SSAS is that nowadays, HMRC audit and approve every SSAS application individually, so the set-up process takes at least two months.
Another advantage of buying a commercial property through your pension is that you can boost your pension pot, not only by making pension contributions (which are limited), but also by paying rents directly to your pension fund.
We have helped many business owners to buy commercial property over the years. To turn your dream into reality, it’s best to plan two to three years ahead.
In terms of wealth creation, making a good commercial property purchase is known as “the one deal you need to make before retirement”.
To find out more, knock on our door !