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Commercial Property Purchase
This particular topic has been highlighted most recently with the legislative changes to the ability of a pension contract being able to purchase commercial property. The pension fund is a very tax efficient method of saving for retirement and with the ability to invest directly into commercial bricks and mortar, the tax benefits are very advantageous.
The pension fund has the ability to borrow up to an additional 50% of the fund value excluding, any non-protected rights. A commercial loan can be made to the Trustees of the pension fund, giving the Trustees the ability to then purchase the commercial property. Typically this additional borrowing would be secured through a High Street Bank. This is currently under review and may change with effect from April 2007.
For example:
A pension fund of £100,000 could be used to fund the purchase of a commerical property valued at £150,000
An alternative, but long established option, would be to secure a commercial loan, this can be taken out by the company or partners of the firm. This too raises questions relating to current and future tax issues. As with many situations, if things are set up correctly from the outset, then this should prevent any unexpected shocks.