Posted on 05/11/2019 by Stephen McPhillips
Stephen McPhillips, Dentons Pensions Technical Sales Director, most recent article has been printed in Retirement Planner.
You can read the full article here:
In this latest case study, Stephen runs through a SIPP/SSAS wind turbine scenario which brought about substantial tax savings for a farming family.
Some of the key messages from this case study:
> rent paid to the farm business by the operator of turbines on the land is substantial and it is adding to the overall profitability of the farming company and in turn, this is inflating the company’s corporation tax bill each year
> if employer and / or member contributions are paid into SIPP or SSAS schemes, it may be possible for the scheme(s) to purchase part or all of the land from the company at an open market value: this needs to be confirmed by a Royal Institution of Chartered Surveyors (RICS) registered valuer
> money paid into the pension(s) by the employer company will find its way back to the company as soon as the property purchase is completed: this will reduce the company’s corporation tax liability but at the same time not deprive it of cash long-term
> the wind turbines themselves could not be owned by the pension scheme(s) as these are classed as “tangible moveable property” and hence taxable if owned by the pension scheme(s) but the land they sit on can be owned by the pension scheme(s)
> the directors decide that they will establish a new small self-administered scheme (SSAS) because all five of them will be members and it presents economies of scale over five SIPPs
> the SSAS receives rent based on its proportionate share of the land, around 68%, which means that only 32% of the rent is now received by the limited company
> the net result is that the company achieved significant corporation tax savings, through pension contributions and reduced rent receivable, and the directors began to accumulate substantial pension funds for themselves.
If you would like more information about the issues raised in this case study please contact your local Sales Manager.