Small Self-Administered Schemes (SSAS) have become an increasingly popular option for UK pension schemes, and one of the investment options available to SSASs is purchasing a commercial property. However, buying a commercial property within an SSAS can offer both benefits and risks.
The main benefit of investing in commercial property through an SSAS is tax advantages. Rental income generated by the property is tax-free within the scheme, and any capital gains made on the sale of the property are also exempt from tax.
Additionally, the members of the SSAS can have greater control over their investments and can choose the property they wish to invest in. Commercial property can provide an alternative source of income and can help spread risk across different asset classes.
There are also added benefits if the SSAS purchases a commercial building that the SSAS members business trades out of as the rent charged is effectively additional pension contributions outside of the individuals Annual Allowance for pensions.
However, there are also risks associated with investing in commercial property through an SSAS. Liquidity risk is a significant concern, as commercial property investments are typically hard to sell quickly.
Property market risk is also a factor, as commercial property values can be volatile and are subject to fluctuations in the property market.
Moreover, owning a commercial property within an SSAS comes with the responsibility of managing the property, including finding tenants, maintaining the property, and ensuring compliance with relevant regulations. If the property is not managed properly, it can lead to additional costs.
As with any investment decision, it is essential to carefully consider the benefits and risks associated with purchasing a commercial property within an SSAS, and to evaluate the scheme’s overall investment objectives, risk tolerance, and financial situation.
As always please speak to your accountant and financial advisor to ensure you acting as tax efficiently as possible and avoiding any issues down the road.