Are you making the best decisions for your business to maximise your company’s returns? Managing all aspects of your business finances and assets in the most tax efficient manner possible is the best way to do this, but without advice, it’s difficult to know where to start.The case study below demonstrates how AEON helped three shareholders to do this through their business property ownership arrangement.
|The problem:||Buying or owning commercial property|
|The benefit:||Property ring-fenced from Company creditors. More tax effective treatment of rent and property value|
|Suitable for:||All business owners|
Graham, Dan and Simon were each a third shareholder in their own manufacturing business.
In 2004 they decided to buy the business premises between them for £300,000 but the company was not in a strong enough financial position to do this. They therefore bought the property personally subject to a mortgage of £150,000.
In 2006, AEON became their advisers and we recommended increasing the funding into their individual pensions, funded via the business. This then meant that in 2010 we were able to arrange for a SSAS (Small Self Administered Scheme) to be established from Graham, Dan and Simon’s pensions. The combined value of their pensions amounted to £525,000 which meant there was sufficient money to purchase the property outright for its then market value of £450,000.
This meant that the three of them, as directors, each received £450,000. This enabled them to repay the outstanding mortgage of £50,000, pay the relevant capital gains tax on the increase in property value and leave each director a sizeable lump sum in cash to use for their own personal requirements.
The business now pays rent to the SSAS and these monies are adding to the value of the director’s pensions month by month, in a tax privileged environment. Now that the property is owned by the pension, any future gain in its value will be totally tax-free.