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27 April 2020
Rohan Manro
The Government have announced a range of measures aimed at supporting businesses during these difficult times. One key measure introduced is the business interruption loans scheme offered to SMEs. However, there remain hurdles and lending criteria to be satisfied before obtaining a loan.
Further to this, the loan will need to be repaid. Whilst this remains an attractive option for businesses to obtaining the funding necessary to continue, there are additional measures which businesses could take to support and complement these measures.
One additional option available to director/shareholders of businesses may be to:
The loan would need to be made on commercial terms and would require:
This allows you to make use of pension funds to inject funds into the business whilst offering security to the pension scheme. In the worst-case scenario, the creditor of the loan is your pension fund.
A pension fund may invest in commercial property. As such, it can be attractive for pension funds to purchase all or part of the businesses trading premises. Any rent paid to the pension scheme is given tax relief but left untaxed in the pension scheme.
Given the current climate, this has become a more attractive opportunity as:
The asset can be held by the pension scheme to continue generating rental income in retirement or sold to a 3rd party without any tax implications.