Business Bounce Back Loans: How to Claim 19% Tax Relief!

by | May 13, 2020

Business Bounce Back Loans 2020

How To Claim 19% Relief on Yours!

Business Bounce Back Loans have now been launched – and many Business Owners are exploring all the ways possible to make the best use of theirs. The following is a case-study which opens up a very interesting conversation.

Can you get tax relief on the money you borrow?

In this case study, the business was profitable and successful until COVID-19 arrived. The business owner had a Small Self Administered Pension Scheme (SSAS) which was invested into an office block with the maximum 50% mortgage on it. The owner had spotted a property deal but was not sure how to structure the deal as he did not want to pay tax on the rental income, or any future capital gains. Not an unusual situation for many businesses these days.

The business ended up with the opportunity to borrow £50,000 as a Business Bounce Back Loan. No repayments for 12 months and interest at 2.5% p.a (LOW!). The question is… should they borrow the money, and what would help them the most in the long-term.

They did some thinking and took some advice and ended up doing the following:

1) They Borrowed £50,000.
2) They made a £50,000 contribution to their SSAS.
3) This Reduced their Corporation Tax Liability by 19% x £50,000 = £9,500.
4) The SSAS used the money (well only a little of it!) – to restructure their commercial property investment into an XPUT.
5) The XPUT was not restricted to 50% Borrowing in the same way as the SSAS.
6) The XPUT was able to re-finance up to the normal commercial limits (75%) – and released a sum of £150,000.
7) The XPUT used this extra money to put some cash into the SSAS.
8) The SSAS was able to make a loan to the Original company of £40,500.
9) The company now had £40,500 plus £9,500 = £50,000 in cash and could (if it so wished) relay the loan after the 12 months payment holiday.
10) The XPUT (Special Property Unit Trust) also had enough cash to make the investment into the another rental property, which generated additional income (tax free), and let the SSAS take advantage of depressed property prices, without having to pay tax on any future gains or indeed the additional rental income. IHT didn’t apply either!

Now – THAT is what I call a Bounce Back!!

Many business owners are unaware of the rules or how they can use their pensions – which is where we can help.

Paul Stewart (Our MD) is a Pensions Administrator (an official HMRC recognised role). He was also an Examiner for the Chartered Insurance Institute dealing with the exams IFA’s had to pass in order to give advice on …PENSIONS! So if there is anyone who can help guide you, then he can!

Most Advisors, such as IFA’s and Accountants do not have the internal experts to assess a client’s FULL situation – and come up with the best overall strategy.

As I have worked in the pensions and tax planning field for over 30 years, I have personal access to experts in all taxes and can combine these experts into a unique service that really does go beyond what you’d get from your normal ‘Advisors’.

Every wealthy entrepreneur or property investor I have ever met had their own Accountant, Solicitor and Financial Advisor – yet in 90% of cases we were able to dramatically able to improve their overall exposure to UK taxes and access to their pension money.

What is vital is the proper implementation – with care at every stage.

This is why we offer a FREE consultation – as it lets us explore your current situation before jumping in with ‘solutions’.

If you are interested in seeing if your pension can be used to help support your business – then call us now, or send us your details and we will call you back. 

We look forward to helping you soon.