Ongoing changes to pension tax relief, and reductions to benefits for higher earners, mean that businesses may be looking at other tax-efficient pension options.
If a company already owns or wants to purchase commercial property, it can be very tax-efficient for the shareholders to purchase the property using certain types of pension fund.
The company can then pay rent at commercial rates to the pension fund. Rent paid is usually an allowable business expense, reducing the company’s taxable profit, while the rental income is in a tax-efficient environment, where generally any growth in value is free of capital gains tax and income received is free of income tax. Pension funds are currently inheritance tax-efficient too.
If you are considering buying or transferring commercial property, expert advice is essential to ensure that property, you are using the most tax-efficient structure for your circumstances.