Investing in my own company using SIPP or SSAS?

Diverse_Synergy

Afternoon good MSE forum people!

I'm brand new to this, so bearwith me if this is too technical a question to be asking here.

In a nutshell here is where I'mat:

- I have a pension portfolio(stakeholder) from previous employment.

- I am in the process of settingup my own business.

- I would like to invest some ofmy pension portfolio in my business in the future.

I have sufficient finance fromother sources to set up the business and move it forward over the next year, soI don't need to access my pension portfolio for funding right now. But forfuture investment I wondered if it is possible/allowed to utilise part ofmy portfolio to invest in my own company - rather than have to resort toexternal sources of funding further down the line.

From my layman's knowledge, I believethat the SIPP rules don't allow you to invest in your own company - and SSASrules may allow you to make a loan to the business, but I'm unsure whether youcould go so far as to formally use it to invest in your own company. However, I'm not 100% sure on either of thesepoints.

I figured common sense ought todictate that I should be allowed to invest in my own company with my pensionpot somehow - otherwise it's a bit ridiculous, because my managed pension fundcould end up being invested in one of my listed competitors without myknowledge - whilst at the same time the rules prevent me from investing in myself! Hardly very sensible.

In summary:

1) Can anyone advise as to the specificrules/options applicable to the above scenario?

2) Failing that, can anyone point me to a linkto the relevant "pensions rulebook" or similar, so that I caninvestigate it myself?

(I appreciate the"safe" advice would be for me to utilise the services of a pensionsspecialist for this, but I am reasonably well-studied in both law and financeand figured that I ought to at least try and have a go at it myself first -assuming someone here can point me to some online resources/rules guidance.)

Diverse_Synergy

Apologies, some of the spacing seems to have gone weird in my above post. I copy/pasted from Word - clearly one to raise with the relevant technical people on here if anyone knows how to do that?

thenudeone

IIRC, you can't invest SIPP funds in a company if you are a director or own 20% or more of the company.

There are lots of other restrictions, the implications of which are easy to overlook. For example you can't gain any benefit or have personal use from any company assets, which rules out using a company car if your SIPP is invested in the company.

Just search online for sipp unlisted shares and lots of useful results will turn up.

System

thenudeone wrote: »

IIRC, you can't invest SIPP funds in a company if you are a director or own 20% or more of the company.
.

You can indirectly. Your SIPP can own the company premises.

thenudeone

Clifford_Pope wrote: »

You can indirectly. Your SIPP can own the company premises.

In which case, you are not investing in the company but in commercial property, which is a completely different matter.

atush

yes, you can own the commercial property/premises of your business in a Sipp as part of your executive pension along with any partners, boosted by tax relief but you do then have to pay the owner (your pension) full market rates.

This would mean your pension buying the property from your company. Which means releasing funds for either company cash flow or pay outs to the directors/shareholders ie you) which is beneficial to save on tax. plus it would mean the rent you pay is a business expense yet goes into your pension and grows tax free as does any capital gain.

Win win

System

thenudeone wrote: »

In which case, you are not investing in the company but in commercial property, which is a completely different matter.

I did say indirectly.
If you purchase the company premises using your SIPP then you are injecting a large chunk of capital into the business. It's as much an "investment" as say a bank loan, but on mutually beneficial terms.

Diverse_Synergy

Cheers everyone. I particularly like the idea of investing in the commercial property with a CGT shield through any gains as it forms part of the pension fund, and a tax shield against the rent - which in turn also acts as regular contributions to the pension pot.

Does anyone have the link to the specific rules governing this? eg are there limits on how much (in absolute or percentage terms) I am allowed to invest? In fact, a link to the relevant "rulebook" for everything to do with SIPPs would be great, just so I can be sure I've covered all eventualities.

For example, do I need to use an accredited pensions professional to manage the scheme, or could I just set it up and run it myself and save on scheme fees? - (as I would be the only director and only employee of my company). In fact, then the possibilities could get more complex, could I go one further for instance and set the SIPP up as a workplace style pension - and make monthly contributions from my salary which is matched by monthly contributions from the company - which then gets reinvested into the company, in theory continually growing both the company and the pension pot?

Mattygroves2

Google SIPP and commercial property and you'll come up with a number of SIPP providers explaining how it works including the possibility of borrowing by your SIPP to help fund the purchase.

As a SIPP is a regulated pension investment you'll need to set one up with a SIPP provider who offers the ability to hold commercial property (which not all will offer) and pay accordingly as its not a simple set up. They will be able to tell you what you can and can't do (and it will be different from one provider to the next) but most of the information is on the internet if you google.

The last sentence of your post is confusing - the only thing you can do is buy the commercial premises it operates from and then the Company would have to pay the SIPP a market rent so you couldn't continually invest in your Company - it would be a one off injection of cash. However, you are right that you'd be sheltered from CGT and the rent would be a valid tax deduction for the Company and wouldn't be taxed in the SIPP. Both employee and employer contributions are OK to a SIPP and a good way to reduce your personal tax bill and that of your company.

thenudeone

Just be careful not to mix up separate issues:

1) whether the company need to own its own property, and if not, whether a sale and lease-back arrangement makes financial sense and fits in with the goals of the company and its shareholders

2) If it does make sense, whether doing it through a SIPP or group SIPP makes sense. Effectively the company sells the property to the SIPP. The funds from the company would have to be distributed to shareholders to invest personally in the SIPP (with obvious tax implications) or directly into the SIPP as an employers' contribution, to provide the funds to buy the property.

Remember the ultimate aim of the SIPP is to provide income to holders in retirement, not to grow a property portfolio for its own sake.

There are lost of issue to consider, but it is do-able, and this scenario was even used as an example of the benefits of a group SIPP by one of the SIPP providers I looked at some years ago.

Diverse_Synergy

I've tried googling a few things on SIPPs, which is useful for ad hoc advice and bits and pieces about specific rules, but I haven't ever come across the entire "rulebook" or whatever official documentation it is that applies to the whole of pensions - which is really what I am after, because some of my ideas involve several different areas.

How does it work with pensions rules by the way? Is it a matter of statute, or is there a 'pensions body' that issues the official regulations? In basic terms, which organisation do I email to ask for a copy of the "rulebook" which I can refer to at my leisure? For instance is it HMRC? Or the Government?

Matty: For a worked example of the type of scenario I am thinking of. Say I have £50,000 in a pension pot to invest. I set up a SIPP and transfer the £50k into it. I then use say £40k to by a very small commercial property (don't need much just for me) - the remaining £10k invested in other shares, being careful not to invest in any of my competitors!

If I set up a workplace style pension scheme, with me as the trustee of the scheme and me as the sole scheme member (assuming this is allowed - this is why I need that "rulebook"!!). I then invest into the SIPP with my monthly salary and contributions from the company. Say after 5 years I have built up another £50k in the scheme - I could then expand the business by purchasing another corporate property with the SIPP portfolio could I not? And so on and so forth throughout the operations of the business.

Then on retirement, I would have several options to divest my funds back out. I could sell the business, but keep the assets held by my SIPP (effectively as a corporate landlord to the new business owner) and live off the rental income. Sell the assets and buy an annuity etc etc.

The point is though, I would have used my pension assets to support my business throughout my working life - rather than just having it invested in other listed companies through a managed pension fund, ironically some of whom could be direct or indirect competitors to my own business!!

This is all just thinking out loud, and it might not be possible (or not advisable) - but hopefully this clarifies my thinking a bit though.