Case studies

John and Steve are 60 and 39 respectively and are the Owners / Directors of their Limited Company which has been trading successfully for 7 years.

The company is profitable, and the directors anticipate that the business will continue to grow over the coming years.

The company owns the building that they currently trade from. It was purchased a few years ago for £157,000 and has recently been valued by a RICS Qualified Surveyor at £185,000.

John and Steve have several objectives as follows:

1. They are conscious that their provision for retirement is less than it should be. Therefore, they are keen to channel surplus business profits into a pension for both directors.
2. They have some concerns around the ownership of their commercial property which is currently owned by the business. They would like to ring fence the property so that if anything ever happened to the company it would be protected from creditors.

The company currently has no bank debt and the Directors were keen for this to continue.

We discussed their attitude to investment risk, their past experience and knowledge of investing and their capacity for loss to ensure any investment recommendation was suitable.

We concluded that they should take the following actions:

• Establish a Small Self-Administered Pension (SSAS) to enable the company to make contributions for both directors.
• After discussion with the company accountant John and Steve decided that they would like to make a pension contribution of £245,000 for the benefit of both directors.
• On reviewing available assets John and Steve asked if they could utilise their company property in lieu of some of the cash promised to the pension fund.
• The pension provider was happy with this proposal and as a result the property was moved into the SSAS for the benefit of both directors.
• An additional cash contribution of £60,000 was also made in to the SSAS from company reserves.

• The combined contributions into the SSAS reduced John & Steve’s gross corporation tax bill by £46,550.
• There were some costs involved in this transaction namely; stamp duty at £700; corporation tax on the profits from the property sale at £5,320 plus around £1,500 in legal fees (all told
• £7,520) but they still benefited from a corporation tax reduction of £39,030 after costs.
• The property is now an asset of John & Steve’s pension fund, so it is ring-fenced from the business.
• John & Steve’s company plus a sub tenant pay a combined rent of £14,150 p.a. into the SSAS which represents a return of 7.64% per annum.
• The rental income received plus any future growth of the value of the building is tax free within the SSAS.