DISCUSSION
Active Chartered Financial Planners managing director Karl Pemberton ( centre ) held an online discussion with Focus on Success MD Gary Lumby ( right ) and George Hardey , director and head of tax at Waltons Clark Whitehill .
PICTURE : CHRIS BOOTH
How to make commercial rents fund your retirement
ACTIVE SPIRIT LIVE
The Active Spirit Live is a new monthly video series where industry experts , clients and friends of Active are invited to discuss hot topics , emerging trends and offer guidance in the world of finance .
In the first session , managing director Karl Pemberton was joined by MD of Focus on Success , and client of Active , Gary Lumby MBE , and Waltons Clark Whitehill ’ s director and head of tax , George Hardey , to discuss the rise in popularity and benefits of using commercial property to fund your retirement .
Here are some highlights from their online discussion …
Karl : Gary , what were your main drivers in buying commercial property as a way to fund your retirement ?
Gary : My wife and I bought a commercial property in our own names , we thought that was the best thing to do . It was only later we realised we could use our pension funds to purchase a property far more tax efficiently . It was only by getting the right advice from Active and from our accountants that we considered it .
Karl : We ’ ve certainly seen an increase in the number of clients considering this . George , as the tax adviser , have you come across a growing number of owner occupier businesses doing this ?
George : Yes . It ’ s much more on people ’ s radars now and it ’ s always a point on our tax planning chart for owner-managed businesses .
Karl : These things take time . How far in advance would you say that business owners need to start considering this ?
George : Whether you ’ re starting from scratch or if there are existing funds ( in the pension ), you ’ re tying that in with the tax relief available for pension contributions so it can often be that you ’ re bringing together a few years of pension contributions to give you the pot you need to carry out the purchase . Early planning is therefore essential .
Karl : What are the tax advantages of doing this ?
George : If you ’ re the owner of the property personally and the business is paying you rent , that rent is part of your taxable income and over time if the business is successful , you ’ re probably paying higher rate tax on the rent . The option of getting the property into a pension scheme puts it in to a tax-free environment . The rent in the hands of the pension isn ’ t liable to income or corporation tax , and increases in the value of the property will be free of capital gains tax .
Karl : There may also be some cash flow benefits and savings for the business too , George ?
George : It could be a cash flow saving and also a way of maximising the size of your pension pot because there have been restrictions on what people can put into their pensions , particularly for higher earners . When you ’ ve got the property into the pension , the business can still continue to pay pension contributions , but the rent will start to accumulate within the pension scheme , boosting the funds .
Karl : Gary , you have been through the process . Is it challenging and would you do it again ?
Gary : I ’ d certainly do it again . I ’ d start thinking early , though . Finding the right premises and the legal transaction can be time-consuming . It ’ s not as straightforward as buying a property normally , but it ’ s a tax efficient and safe investment for the future – but take the right advice from your financial adviser and your accountant .
To watch the full video on YouTube , search ‘ Active Chartered Financial Planners ’. activefinancialplanners . co . uk # TheClearAdvantage
The content of this blog is for information only and must not be considered as financial advice . Active always recommends that you seek independent financial advice before making any financial decisions . The Financial Conduct Authority does not regulate taxation advice . Active recommends you speak to a tax adviser / accountant for this and would be happy to introduce you to one of their close partners .
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