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Fed up with renting? Become your own landlord

When managing director Tony Byrne (pictured above) calculated that renting an office had cost his business £200,000 over 15 years, he put a very simple solution to his business partner at Wealth & Tax Management...

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WE USED to rent offices.  I once calculated that over a 15-year period we had spent £200,000 on rent and we had to put up with a landlord we didn’t like. We had to look after the property like it was our own and pay for everything and return it to the landlord at the end of the lease in the same condition as at the beginning.

I told my business partner we could have bought an office for that amount of money instead and become our own landlords.  So that’s what we did, only highly tax efficiently.  Let me explain how.

My business partner, his wife and I used our Self-Invested Personal Pensions (SIPPs) to buy a two-floor office at Furzton Lake without using any borrowing so we bought it outright for cash.  Our personal pension had to be transferred into pure SIPPs.  Such SIPPs allow self-investment into commercial property and shares and allow borrowing to buy property.

Because a pension scheme is a separate body in law our business had to take out a lease on the property and pay rent to our new landlord in other words our SIPPs!  We finally found landlords we liked – ourselves!  We have never looked back since.

The beauty of this arrangement is that the rent we pay to our SIPPs doesn’t feel like rent.  It feels like pension contributions and is 100% tax deductible.  However, the payments do not count towards your Annual Allowance maximum contributions.  What’s more the rent received by our SIPPs is tax-free and there will be no Capital Gains Tax to pay when sold.

I am in the process of buying out my ex-partner’s and his wife’s share of the property which I am financing 100% with a SIPP mortgage.  Needless to say, we are all happy with the outcome.

  • If you are interested in advice on tax mitigation for your business, why not take advantage of a one-hour Discovery Meeting either at our offices or by a video conference call at our expense worth £270 to each of the first three readers who contact us before 31 October 2022? You know it makes sense.*  We offer a great cup of coffee too! Ring us on 01908 523740 or for free on 0800 980 4516 or email wealth@wealthandtax.co.uk.
  • The Financial Conduct Authority does not regulate tax planning. The contents of this article are for information purposes only and do not constitute individual advice. You should always seek professional advice from a specialist. All information is based on our current understanding of taxation, legislation and regulations in the current tax year.  Any levels and bases of relief from taxation are subject to change. This article is based on my own observations and opinions.

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