Background
Dale Farmers Ltd is a successful family run farming business owned by Directors John and Rose Dale. With forecast profits of £300,000, the business continues to perform strongly, and John and Rose are planning to retire within the next 5–7 years. They intend to bring their three adult sons into the company, who will gradually take over responsibility for running the farm and have several new projects they wish to undertake to expand the business.
The farmland is currently owned by the company and was valued at £425,000 two years ago. By selling the land to a SSAS at open market value, Dale Farmers Ltd can release capital back into the business - providing the sons with the funds needed to move forward with their projects while continuing the transition to the next generation.
Solution: establishing a Small Self‑Administered Scheme (SSAS)
- Dale Farmers Ltd. establishes a SSAS to receive:
- Transfers of John and Rose’s existing pensions – John currently has £180,000 in a personal pension and Rose also has £80,000 in an existing personal pension
- Gross employer contribution of £250,000, split equally between John and Rose and their 3 sons.
- SSAS bank account now contains £510,000 in cash.
- The farmland has been re-valued by a RICS qualified surveyor and the value has increased to £450,000 so the SSAS pays this amount to purchase the farmland.
- Dale Farmers Ltd agree to a lease paying an Open Market rent of £50,000 p.a. to the SSAS.
Benefits
Benefits for the business
- The cash has been released from the SSAS, providing the sons with the capital required to grow the business.
- Dale Farmers Ltd has saved £50,000 in Corporation Tax (20% of the £250,000 employer contribution) and will continue to benefit from an additional £10,000 per year in tax relief on the rent.
- The company continues trading successfully, making significant pension contributions for the Directors, reducing Corporation Tax, and supporting long-term business stability.
Benefits for the Directors and family
- The family now has a pension scheme that is fully under their control and actively supports the business.
- With the SSAS under their control, they benefit from:
- greater investment flexibility (they are trustees too)
- more benefit options (they choose when and how benefits are taken)
Long-term financial planning and succession advantages
- Ownership of the farmland is now spread across the family via the SSAS, helping to reduce future Inheritance Tax (IHT) exposure.
- The structure supports succession planning, enabling John and Rose to transition responsibilities smoothly to their sons while safeguarding pension growth for all members.