Glossary and definitions

A glossary and definitions of the terms and phrases used in the areas of SSAS pensions, tax, loans, pensions, investments, property.

  • Understanding the Small Self-Administered Scheme pension (SSAS)
  • SSAS pension terms and phrases
  • Your pension and how is it managed and invested
  • Your pension options
  • Property investment
  • Alternative Asset Classes

The Lifetime Business Tax Plan

Business Property Relief

Business Property Relief (BPR) is a form of tax relief that is applied to shares in your business, only if HRMC deem it appropriate. BPR can only be claimed where your company is a genuine trading company and not an investment company. For some businesses, such as those that own buy-to-let property, relief can never be sought because the company is already an investment company.

Family Investment Company

A Family Investment Company (FIC) enables company directors to pass on wealth to their beneficiaries, whilst still maintaining control of assets. A Family Investment Company is often a strategy employed to ensure optimum tax efficiency.

IHT

Inheritance Tax (IHT) is a tax that is applied to your estate when you die, should the value of your estate be over a certain amount. Your estate includes your money, your property, your possessions, and any other assets that were owned by you at the time of death.

Investment Trust Fund

The Investment Trust Fund is recognised as having a similar structure to a Family Investment Company (FIC). Shareholders of the original trading company (which may have inadvertently become an investment company) remain in full control of all the money, but that money is effectively held in trust for the benefit of their family. This simple plan removes the tax charge in its entirety and allows the beneficiaries to receive the full balance. The funds can be invested in a variety of different asset classes, including property, property crowdfunding, shares, gold and many more options. Tax is only applied to the gains made through the investments, not the actual cash balance held. Most importantly, the grey area of whether the company has become an investment company or not is removed and BPR can be claimed on the company share value.

Surplus Company Cash

A cash surplus is the cash that exceeds the cash required for day-to-day operations

Tax-exempt Savings Account

A tax-exempt savings account is an account that can receive profits from investments, for example via an Investment Trust Fund, without suffering a tax charge. A SSAS is an example of a tax-exempt savings account. A SSAS can also make investments which are not subject to either capital gains tax or corporation tax.

The Lifetime Business Tax Plan

The Lifetime Business Tax Plan (LBTP) is a solution that offers company directors the ability to protect their wealth for their family, whilst continuing to grow their business, invest at their own discretion and grow their pensions, but without the impact of huge tax penalties. The Lifetime Business Tax Plan is made up of two components, an Investment Trust Fund and a Small Self-Administered Scheme (SSAS). By fusing these two powerful components, innovative and formidable strategies can be created for yourself, your business and your children. The Lifetime Business Tax Plan is the ultimate tool for optimising tax efficiency and protecting your wealth for generations to come.

Annuity

An annuity is a set income paid for the rest of your life. A pension annuity is bought with all or some of the funds from a pension to provide a regular retirement income.

Annual allowance

A person’s annual allowance is the maximum amount eligible for tax relief in a single tax year. The level of annual allowance is set by HMT (Her Majesty’s Treasury).

Beneficiary

A beneficiary is an individual who is nominated/eligible to receive financial benefits or other benefits. In respect of a SSAS pension scheme, members will nominate beneficiaries to receive benefits from their proportion of the scheme.

Commercial property

Commercial property is land or buildings intended for use by business and NOT residential property. Residential development land, prior to any property on the land being classed as habitable.

Connected party

There are several examples of a connected party in relation to a SSAS scheme. This could be a relative or partner of a SSAS member or a company owned by them. The company that starts the SSAS is also classed as a connected party.

Corporate Trustee

A Corporate Trustee is a professional, appointed to ensure that the scheme adheres to rules and regulations. This is a responsible position. A Corporate or Professional Trustee is a co-signatory of the scheme assets and can ensure certain investments and actions are prevented, should they have potential to break HMRC rules or have negative affect upon the SSAS.

Debenture

A debenture, put simply, is a legal agreement between a lender and a borrower. It is legally registered and lodged against a company’s assets. The restriction prevents the company from selling registered land or property without authorisation of the holder (or often as is the case with a SSAS, the corporate trustee acting on your behalf)

Defined contribution pension

A defined contribution pension means that funds are paid into the pension pot. Money can be invested and when you retire, what you get depends upon how much you have saved and the results of your investment choices.

Diversification

Diversification means putting your funds into a variety of different investments to spread the risk. Within a SSAS pension, this is even more flexible and investment choices can be diversified even more that with traditional pensions.

Drawdown

From 55, drawdown can be taken from your pension. This means you can take as much or as little as you want. However, it must be understood that your income is reliant upon the performance of your investment choices. You may only take the first 25% tax free.

HMRC

HMRC stands for Her Majesty’s Revenue & Customs. The Government department that regulates tax and tax relief and creates the rules applied to the investments you can make and benefits you can take.

In specie contribution

In specie contribution is the process of moving assets into the SSAS without selling them. This avoids the costs that would otherwise be associated with selling and repurchasing the assets.

Lifetime allowance

The lifetime allowance is the total amount that a SSAS member can accumulate before they incur tax penalties. Once the lifetime allowance is exceeded, tax is payable.

Loanback

The SSAS loanback is a SSAS pension advantage that is allowed by HMRC rules in which you are able to make a loan from the SSAS pension to your company.

Lump-sum

An amount taken from the pension as a single cash payment is known as a lump-sum. Only the 25% of the amount will be tax-free.

Market value

Market value is the price an asset might reasonably be expected to fetch on a sale in the open market.

Member

In respect of a SSAS, a member is an active, pensioner, deferred member or a pension credit member of a SSAS scheme.

Member trustee

Member trustees are members of the SSAS scheme. Trustees are responsible to HMRC and The Pensions Regulator for the SSAS complying with pensions law. For the SSAS to benefit from allowed pension exemptions and tax benefits, all scheme members must be Trustees.

Occupational pension scheme

An occupational pension scheme is a pension scheme established by an employer or employers to provide benefits to, or in respect of, employees.

Pension freedom

Pension freedom was Introduced in 2015 and the pension freedom rules mean that upon retirement, benefits can be taken from the pension as wanted. Prior to these rules, amounts were limited.

Professional Trustee

A professional trustee is a person or company, appointed to ensure that the scheme adheres to rules and regulations. This is a responsible position. A Professional Trustee is a co-signatory of the scheme assets and can ensure certain investments and actions are prevented, should they have potential to break HMRC rules or have negative affect upon the SSAS.

Qualifying recognised overseas pension scheme

A UK qualifying recognised overseas pension scheme is a non-UK pension scheme that satisfies HMRC requirements.

Sponsoring company

The sponsoring company is the related company to the director setting up the SSAS.

Sponsoring employer

The sponsoring employer is the director and employer, or any of the employers, of the company that sets up the scheme.

SSAS Administrator

A SSAS must have a scheme administrator. The SSAS Administrator is a formal role, responsible completing HMRC returns and other administration functions and other duties within the scheme.

SSAS Drawdown

SSAS drawdown refers to the withdrawal of income from the SSAS.

SSAS Practitioner

A SSAS Practitioner is an advisory only position, appointed to support the setup of a SSAS scheme. This is not a responsible position and ultimate responsibility and liability remains with the SSAS administrator and member trustees.

SIPP

SIPP stands for Self-Invested Personal Pension. A SIPP is a personal pension as opposed to a SSAS, which is a corporate pension scheme.

TLP

TLP stands for The Landlord’s Pension

TPR

TPR stands for the Pensions Regulator. As a corporate pension, the SSAS is regulated by The Pensions Regulator (TPR).

Trust

A trust is a collection of assets, governed by a trust deed and the rules set out within it. Trustees ensure that the trust rules detailed in the deed are adhered to.

Trustee

A trustee is a company or an individual member of a trust. Members have responsibilities within the trust to make sure that trust rules are adhered to.

Unconnected 3rd party loan

Unconnected third party loans are loans to a party who is not related to the SSAS, its members or a company owned by a SSAS member.

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