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Director Benefits and Pensions
SIPP & SSAS Pensions
SIPP (Self Invested Personal Pensions) and SSAS (Small Self Administered Schemes) pensions are great pension options for Business Owners or Directors. Pension rules mainly came in line with all personal pensions in April 2006, however there are still come exceptions to help Directors of SMEs (Small Medium Enterprises) to support there companies. Some would be:
Pension – Commercial Property Purchase
A pension can purchase a commercial premises, subject to HMRC approval. This premises can then be leased back to your company. This means the rent in which you pay will be funding your Pension rather than paying a landlord.
All future gains and rental income within the pension is free of tax and if there are insufficient funds within the pension to purchase a property, the pension can borrow to support the purchase.
This is a complex area which Lexington is experienced in, for further details please contact our offices.
Loans
Using a SSAS (Small Self Administered Scheme), loans can be given to sponsoring employers but not to members or any person or company connected to the sponsoring employer or member. This means that a SSAS can lend money to the sponsoring employer but a SIPP can't, as there is no sponsoring employer to lend to. Any loan made by a SIPP (Self Invested Personal Pension) to the member or a person or company connected to the member would be an unauthorised payment and taxed accordingly.
Own Company Share Purchase
A SSAS can invest up to 5% of the fund value in the shares of the sponsoring company. It can also buy shares in more than one sponsoring employer so long as the total market value at the time the shares are bought is less than 20% of the total value of the scheme. A SSAS can potentially own 100% of a company’s shares so long as the value doesn’t exceed 5% of the value of the SSAS.
A SIPP doesn’t have a sponsoring employer so can theoretically invest up to 100% of the fund in the shares of any company, including one run by the member. However if the SIPP member owns or is associated to the company being purchased, it is taxed significantly to make the transaction unbeneficial.
Director Benefits and Life Insurance
Shareholder/Partnership Protection
Making sure your family and loved ones benefit from your efforts at work. Arranging suitable life assurance so that in the event of your death your shares go to who it is intended.
On death your shares will pass in accordance to your Will. Normally all assets will go into Trust or to your spouse/children. Your business partners may not want this, and your beneficiaries may not want this.
Therefore we can arrange for there to be a life assurance policy written in trust so that if your business partner needs cash to purchase the shares from your beneficiary, or your beneficiary wants to sell, the exchange can happen. If both are happy then nothing needs to occur and your business partner keeps the life assurance proceeds and your beneficiaries keep the shares and future possible dividend/capital value that goes with this.
This is good housekeeping!
Key Man or Key Personal Assurance
This is a life assurance policy, owned by the business which will pay a cash lump sum, or staged payments to cover the losses which might be incurred with the loss of a key member of staff – for example a top sales person, a Finance Director or Company Director/Chairman.
The costs may be the bank forcing the repayment of an overdraft, a head-hunters/recruitment agency fee to find a new member, loss of revenue whist finding and training the new member and training costs.
For a small premium, it’s wise for your company to transfer this risk to an insurance company.
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