Extracting company profits to invest in property, using your pension
Extracting company profits to invest in property, using your pension
I am going to focus on painting a picture to explain a tax efficient method for extracting company profit. This picture, could serve as the basis for a discussion with your financial advisor, and help you then make a more informed decision.
The two vehicles I would suggest are a Self Administered Pension Scheme (SAPS), combined with a pension mortgage.
How a Self Administered Pension Scheme (SAPS) works
Pension premiums paid by a company on behalf of a director are deducted as an expense against corporation tax.
If you are self employed, or are a director with more than a 5% shareholding in your company you can take up to 25% of your retirement fund in cash, tax free. Pension contributions are invested in funds, which grow tax free. This means that you are not liable for the 23% tax that other savings products incur.
The amount of money a company can pay into a pension plan on behalf of a director depends on your salary, the length of time you have been with the company and when you intend to retire. The amount of money which can be paid to a pension is very substantial and allows you to build up a large retirement fund, from which to pay off your mortgage. You can choose to retire any time between age 50 and 70.
The SAPS is probably the most flexible pension for company directors/ self employed. It does, however require a reasonably high level of contributions for it to be cost effective as set up costs tend to be €2,000 upwards and annual management fees around €1,000.
How a Pension Mortgage works
On March 25th 2004 legislation changed to allow investors to combine the attractions of good quality property investment and related borrowings with the generous tax breaks afforded to pension plans.
A Pension Mortgage is one of the most tax efficient methods of repaying a home loan because customers utilize the cash value of a personal pension fund to repay the amount borrowed.
Some of the typical features of a pension mortgage are as follows;
* The initial equity amount may be made up of a transfer value, single premium, or the first regular premium. Financial institutions will typically fund between 50% and 75% of the purchase price of the property.
* All pension contributions can be offset against taxable income within Revenue approved funding limits.
* Rents can be used to offset interest payments and as such are tax free.
* A Pension mortgage is like an endowment mortgage, with only interest being paid on the loan.
* You will probably be asked to take out a life policy to protect the lump sum in the event of death.
* Investors have to remain at “arms-length” from any property invested in such a scheme, this means that they, or any person connected with them, may not utilize the property.
On exit from an investment, the property may be disposed of without capital gains and the capital can be put into an approved retirement fund.
This method provides tax relief not only on interest repayments but also on pension contributions (therefore, tax relief is also received on the capital repayments). In addition, the pension fund grows free of tax.
How you combine the two pension vehicles
This means that a company director with more than 5% shareholding in their can use a pension mortgage to purchase a property in their own name, yet effectively have the company pay for it.
You take out a personal mortgage on which you make the interest payments. At the same time the company sets up your SAPS on your behalf which, at retirement, can be used to pay off the mortgage. The company receives full corporation tax relief on the pension contributions.
It is important that all aspects of the investment are looked at, including the potential for over-funding.
Extracting company profits to invest in property using your pension - To learn more about this author, visit Peter Lawless's Website.
Like this article? Share it with your friends
There are 4 principle type of pension that a person can take out. Indeed when you get talking to the tax and pension specialists, these options seem to multiply by the second. In the end you don’t know whether you are coming or going.
I am going to focus on painting a picture to explain a tax efficient method for extracting company profit. This picture, could serve as the basis for a discussion with your financial advisor, and help you then make a more informed decision.
The two vehicles I would suggest are a Self Administered Pension Scheme (SAPS), combined with a pension mortgage.
How a Self Administered Pension Scheme (SAPS) works
Pension premiums paid by a company on behalf of a director are deducted as an expense against corporation tax.
If you are self employed, or are a director with more than a 5% shareholding in your company you can take up to 25% of your retirement fund in cash, tax free. Pension contributions are invested in funds, which grow tax free. This means that you are not liable for the 23% tax that other savings products incur.
The amount of money a company can pay into a pension plan on behalf of a director depends on your salary, the length of time you have been with the company and when you intend to retire. The amount of money which can be paid to a pension is very substantial and allows you to build up a large retirement fund, from which to pay off your mortgage. You can choose to retire any time between age 50 and 70.
The SAPS is probably the most flexible pension for company directors/ self employed. It does, however require a reasonably high level of contributions for it to be cost effective as set up costs tend to be €2,000 upwards and annual management fees around €1,000.
How a Pension Mortgage works
On March 25th 2004 legislation changed to allow investors to combine the attractions of good quality property investment and related borrowings with the generous tax breaks afforded to pension plans.
A Pension Mortgage is one of the most tax efficient methods of repaying a home loan because customers utilize the cash value of a personal pension fund to repay the amount borrowed.
Some of the typical features of a pension mortgage are as follows;
* The initial equity amount may be made up of a transfer value, single premium, or the first regular premium. Financial institutions will typically fund between 50% and 75% of the purchase price of the property.
* All pension contributions can be offset against taxable income within Revenue approved funding limits.
* Rents can be used to offset interest payments and as such are tax free.
* A Pension mortgage is like an endowment mortgage, with only interest being paid on the loan.
* You will probably be asked to take out a life policy to protect the lump sum in the event of death.
* Investors have to remain at “arms-length” from any property invested in such a scheme, this means that they, or any person connected with them, may not utilize the property.
On exit from an investment, the property may be disposed of without capital gains and the capital can be put into an approved retirement fund.
This method provides tax relief not only on interest repayments but also on pension contributions (therefore, tax relief is also received on the capital repayments). In addition, the pension fund grows free of tax.
How you combine the two pension vehicles
This means that a company director with more than 5% shareholding in their can use a pension mortgage to purchase a property in their own name, yet effectively have the company pay for it.
You take out a personal mortgage on which you make the interest payments. At the same time the company sets up your SAPS on your behalf which, at retirement, can be used to pay off the mortgage. The company receives full corporation tax relief on the pension contributions.
It is important that all aspects of the investment are looked at, including the potential for over-funding.
Extracting company profits to invest in property using your pension - To learn more about this author, visit Peter Lawless's Website.
Like this article? Share it with your friends
 | |
 |
No article feedback found. |
| |
Leave Your Feedback |
 | |
| |||
Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
|||
Jeff FosterWebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas. We specialize in internet consulting & internet marketing. - Visit Jeff Foster's Website |
|||
John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
|||
Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
|||
Joe DagerJoe Dager is President of Business901, a progressive coaching company providing no-nonsense direction in areas such as Lean Six Sigma Marketing and organized referral marketing. What others say: In the past 20 years, Joe and I have collaborated on many difficult issues. Joe’s ability to combine his expertise with “out of the box” thinking is unsurpassed. He has always delivered quickly, cost effectively and with ingenuity. A brilliant mind that is always a pleasure to work with.” - James R. If you want to learn more about Business901, start a conversation with us. We can be found @ Web/Blog: Business901.com Web/Blog: FundingYourNonprofit.com LinkedIn Profile Follow me on Twitter - Visit Joe Dager's Website |
|||
Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
|||
Staging DivaDebra Gould, aka The Staging Diva®, is President of Six Elements Inc., an internationally recognized home staging company. Inspired by many requests from aspiring home stagers wanting to start similar businesses, Gould created the Staging Diva Home Staging Business Training Program. Gould has trained over 1000 Staging Diva Graduates worldwide to start staging businesses. Buying decorating and selling six of her own homes in four years lead to an interest in real estate staging which she turned into a career with the launch of sixelements.com in 2002. Since then she has staged hundreds of homes in addition to teaching home staging training. Gould is the author of several home staging resources including a series of popular ebooks made up of a Design Guide, Color Guide and Portfolio Guide. For more information about Debra Gould visit stagingdiva.com. - Visit Staging Diva's Website |
|||
Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
|||
|
To learn more about the Evan Elite Author Program please contact us. | |||
 | |
|  |
Subscribe to Peter's articles
 | |
|
|  |
 | |
|
| |
 | |||||||
|
 | ||
|
||
|
||
|
||
|
| ||
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"
Click Here To Learn More |
|
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
|
 Why MLMs Fail Serenity Cards SEO Made Simple Sample Chapter Joint Ventures ebook TeleSeminar Etiquette |
|
 | ||
 |
Top 50 Blogs For Startups
Top Blogs To Watch In 2008 | |
 |
The Top 10 ProBlogger Posts
Best Posts for Bloggers | |
| ||
 | ||||
| ||||
|
| ||||
| ||||
|
|
|
|
|
||||||||||||
|
Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
|
|
|
