Stephanie's story

Tax advice and financial advice need to go hand in hand for business owners

The problem

Frankly, when we first met with Stephanie her financial affairs were, without being too rude, a bit of a mess. Certainly far more complicated that they needed to be.

She her business owned a property and had taken out an Endowment to repay the mortgage. Unfortunately this arrangement had led to a tax enquiry, which was naturally causing Stephanie sleepless nights.

It wasn’t all bad news though; Stephanie ran a successful business, which was cash rich. She also had a SSAS (Small Self-Administered Scheme) pension, which again was looking healthy.

It was clear that Stephanie’s finances needed a root and branch review, from an adviser with both financial planning and taxation experience.

Our advice

With their taxation and financial planning background, our advisers were perfectly positioned to help Stephanie.

We recommended that the ineffective Endowment plan was sold. Stephanie took our advice and used the funds to repay the mortgage on the property.

We then transferred the property into the pension.

What did this advice achieve?

Firstly, the sale of the Endowment policy put an end to the tax enquiry; which Stephanie was very grateful for.

Secondly, by repaying the loan 10 years early, the company saved thousands of pounds in interest payments.

Finally, with the property now owned in the pension fund, all future rent would be received by the SSAS without the need to pay tax, whilst still being deductible by the business as an expense. Furthermore, no Capital Gains Tax will be payable when Stephanie decides to sell the property.

What can we learn from Stephanie?

Stephanie’s situation was hugely complex, but nevertheless very interesting for us to work on.

It teaches us three key things.

Firstly, business owners should work with an adviser who understands both financial planning and our complex tax laws. You may think that all advisers have these skills; unfortunately that is not always the case.

Secondly, working with an adviser who regularly reviews your circumstances, is vital for business owners, where things can change more frequently.

Finally, there can be tremendous benefits to business owners of holding the property from which they trade in their pension. Not only does it reduce tax, but it means money isn’t wasted on rent and can also reduce interest payments.