A comprehensive guide to HMRC rules and regulations for SSAS pensions.
TLPI have been dealing with property investors and in particular those who purchase properties via their limited companies for over 14 years. As company directors these individuals are eligible to establish a Small Self-Administered Scheme (SSAS) pension, enabling them to utilise funds from existing and “frozen” pension schemes at any age to invest in and grow their property businesses.
SSAS pensions are subject to the HMRC rules and regulations for SSAS pensions. With this in mind it is vitally important that the members of these schemes have the knowledge and guidance on the rules, what is and isn’t permissible and the potential consequences of a breach of the rules. The headline figure for any pension transaction that breaches HMRC rules is a fine of 55% of that transaction. Combine this with the fact that the company or individual involved would then potentially come under increased scrutiny from HMRC, this is not a position that anyone wants to find themselves in.
As a SSAS broker TLPI took the decision at outset to only work with SSAS administrators who act as professional corporate trustees. This gives our clients the peace of mind that while they have the autonomy over their funds giving them the control and flexibility they desire that they have a team of experts in the administrators ensuring that these decisions do not fall foul of HMRC SSAS rules and regulations, combined with the ongoing help and support from TLPI on the best way to increase the fund value and ultimately provide the funds our clients require in retirement.
Most property investors concentrate on residential property, whether it be single lets, HMO’s, serviced accommodation or holiday lets. It is important to note that under HMRC rules, the direct purchase of residential property by a pension fund is prohibited. Many investors are under the illusion that if the asset is bought through a limited company or run as a commercial enterprise, that this is sufficient to class the asset as a commercial entity. Unfortunately, when it comes to pension purchases HMRC do not share this view. Regardless of how the property was purchased or how it is run the view of HMRC is a property is classed as a residential asset if:
The most important, and some would say ambiguous statement, is that of the asset being “suitable for use as a dwelling” In SSAS pension terms an HMO, serviced accommodation and holiday lets fall into this category as the building(s) could realistically be converted into a family home or homes, which in most cases was the original use of the property or properties involved.
With regard to permissible property an example of HMRC’s definition of these are:
In the event that the asset to be purchased is vacant or derelict then HMRC’s guidance is that you must look back at the last time it was used. If it was last used for one of the non-residential purposes set out above then it is not treated as residential property. If the building has never been used and is more suitable for one of the uses specified above than for any other purpose, it is not treated as residential property regardless of their suitability for use as a dwelling.
This brings us on to the purchase of property with the intention of change of use and commercial to residential conversions. This can be a bit of a minefield and is an area which should only be entered into when fully informed and prepared.
When purchasing a property which is deemed as commercial through a SSAS pension scheme, the full available funds can be utilised and in addition up to 50% of the fund value can be raised with an external lender for this purpose. It is imperative that this asset is never deemed as residential whilst owned within the pension fund. As such, the timing and disposal of an asset is key and whilst the SSAS pension funds are an invaluable tool for the initial purchase of the property, a robust exit strategy is essential when considering this type of venture as is mentioned in the HMRC rules:
The rules for this kind of development are explained in the HMRC guidance below:
In summary, the ability for company directors to take control of their pension funds through a SSAS pension and invest in their property businesses is an option which more and more people are taking advantage of. That said, it is important to ensure that you deal with experienced professionals such as TLPI during this process, from the initial establishment of the pension scheme through to HMRC registration, transfer and purchase and investment decisions.
Recently been working with Tom at the Landlords Pension through a recommendation from a close friend. Tom is very knowledgeable and explained their services very clearly. Really helpful and friendly guy who immediately put me at ease. Always at the end of the phone or email ready to answer any questions I have.
Highly recommend The Landlords Pension for setting up a SSAS pension. Many Thanks to Liam, Michelle, Teresa and the team for their support throughout and making it an easy process. Looking forward to our working relationship with future investments.
Wouldn’t hesitate to recommend there services to open a SASS, massive thanks to Dan, Michelle and Teresa who made the setup seamless, very supportive throughout the whole process.
Look forward to many years of successful investments with The Landlords Pension
Highly recommend The Landlord’s Pension for opening a SSAS. They are highly professional yet friendly and personable. They are really helpful and keep you informed every step of the way. It’s refreshing to pay for a service by a company who actually do what they say they are going to, with zero aggravation and problems! Thank you guys 🙂
I recently opened my SSAS through The Landlord’s Pension and they have been professional, approachable and efficient throughout. Simon, Teresa and Michelle have all been great in answering my questions and queries and doing their best to ensure the process of transferring over my existing pension has been a smooth and seamless one. I would have no hesitation in recommending them.
I’ve been working with The Landlord’s Pension this year to sort out historically messy pension arrangements and take control by creating a Family SSAS. Chris Brown has been an absolute pleasure to deal with, friendly professional advice all the way through. Thanks!
We had a number of workplace and final salary pensions, dotted all over the place and decided to pull them all into one SSAS. Laura and the team were excellent in explaining what to expect and keeping us advised every step of the way, in fact as part of the fact-find, we came across pensions we didn’t realise we had! I manage my own SSAS, but I know that Laura is at the end of the phone if I need her and she will not hesitate to help. I couldn’t recommend The Landlord’s Pension enough, they were absolutely brilliant!
