Albert Goodman was approached by this business owner as he felt that they were not getting value for money from their existing accountant and was looking for an alternative quote.

On reviewing their affairs we identified that some tax planning could result in significant savings. This involved taking the owner’s pension fund and putting this into a SIPP. The SIPP then borrowed from the bank to purchase the trading premises for their business. Tax opportunities were then as follows:

• The company gets relief for pension contributions to the SIPP as well as the rent paid. As the SIPP uses these funds to repay the property mortgage, the company is effectively getting relief for the part of the capital cost of the property funded by the bank borrowing.
• The client has the flexibility to make extra contributions, via the company, into the SIPP. This provides the opportunity to take small company marginal rate profits out to a tax free environment
• The problems of double taxation on sale of company owned properties do not arise
• Any increases in the value of the property are not taxed.
• The property was purpose built for the client and the developer charged approx £40k for creating office space and installing computer network and telephone cabling etc. Much of this will qualify for plant & machinery capital allowances (ie function not setting) so the company has been invoiced rather than the SIPP.
• The client has another route for NIC free withdrawal of funds from the company
• The SIPP is registered for VAT and opted to tax the rents so that VAT on construction of the unit could be reclaimed.

There were also a number of non tax implications:

• Insolvency of the company will not endanger the pension fund
• The person has greater control over their pension at a time of poor rate of return in pension funds generally
• Flexibility to vary pension contributions and the ability to "manage" future CT profits and cashflows in the company
• Effect on the company gearing ie property and mortgage are not on the balance sheet
• The opportunity to make further property/other investments in the pension fund as cash allows (particularly when the property mortgage has been paid off)
• Provided the pension fund is properly set up, this can be a good way of protecting wealth from IHT in the event of early death
• The pension fund can remain long after the business has gone

Our teams advice resulted in a happy business owner and a new client for Albert Goodman.