Small Self Administered Pension Scheme (SSAS) – Fully Independent Advice London
A SSAS is a company pension scheme where the members are usually all company directors or key staff. The acronym stands for small self administered scheme. A SSAS is set up by a trust deed and rules and allows members and employers, greater flexibility and control over the scheme’s assets.
Contributions paid to a SSAS are subject to the same rules as other registered pension schemes. Consequently there is no limit on the level of member contributions but tax relief is restricted to the higher of £3,600 or 100% of UK earnings. Tax relief is also limited by the Annual Allowance. Contributions made by the employer are also unlimited. Employer contributions are deductible against corporation tax provided that they are wholly and exclusively for the purposes of the employer’s trade. If an employer’s contribution is over £500,000 more than the previous year, tax relief may be spread.
SSAS loans can be made to the sponsoring employer but are subject to certain conditions set by HMRC. These include:
- The loan should not exceed 50% of the net market value of the scheme’s assets
- The loan should be secured against assets of an equal value by way of a first charge
- The loan’s terms should be no longer than 5 years Interest of at least 1% above bank base rate should be charged on the loan
The trustees of a SSAS can invest in a broad range of investments, including:
- Commercial property and land;
- UK quoted shares, stocks,
- gilts and debentures;
- Stocks and shares quoted on a recognised overseas stock exchange;
- Futures and options quoted on a recognised stock exchange;
- OEICs, unit and investment trusts;
- Hedge funds;
- Insurance company funds;
- Bank and building society deposits
- Gold bullion
SSAS shareholdings in the sponsoring employer should not exceed 5%. Shares can also be bought in more than one sponsoring employer as long the total holdings are less than 20% and shares in any one sponsoring employer are less than 5%. There is no restriction (apart from the self-investment restrictions above) on the percentage of shares which can be held in one company.
If the SSAS is deemed to be an investment regulated pension scheme (IRPS), tax charges will apply if the scheme invests in taxable property. The definition of an IRPS includes: Company schemes where there are less than 50 members and at least one of them (or a person related to a member) can direct, influence, or advise on investment matters relating to the scheme;
Company schemes that do not meet the above conditions but a member (or a person related to a member) can direct, influence of advise on investment matters relating to the member’s arrangement. Taxable property means investment in residential property and tangible moveable property, e.g. fine wines, vintage cars etc. If investments are made in taxable property, an unauthorised payment charge and a scheme sanction charge will apply. Capital gains can also apply on the sale of a taxable property. SSASs may borrow to invest and to provide a member’s benefit which has become payable. The maximum amount that can be borrowed is 50% of the net asset value of the scheme.
Advice on small self administered schemes (SSAS) is essential
SSAS offers incredible investment flexibility and the opportunity for dynastic tax planning – particularly in family businesses. They are particularly suited for use as a tax exempt vehicle for holding commercial property.
They are not available to the self employed who should consider SIPP. They are most often used by director shareholders in small to medium size limited companies.
Contact Us London’s small self administered pension scheme (SSAS) experts for further information.
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