Covid-19: the effects on SSAS owned properties

Published by Robert Hunschok on

Estimated reading time: 3 minutes


The impacts of the Covid-19 pandemic are both widespread and unprecedented. Aside from the obvious sociological and health impacts, there have been extensive economic implications for all industries. Because many businesses will be a tenant of a commercial property held in a SSAS, we are seeing knock-on effects.

What are the effects of Covid-19 on SSASs?

The most publicised, and perhaps obvious, effect of Covid-19 on the pensions industry (including self-invested pensions) is the negative impact on investment values, particularly equities.

Other consequences have included third parties involved in the running of pension schemes (including Barnett Waddingham) having to change their working practices, as well as members looking for ways to increase their pension income because of earnings reductions elsewhere.

In addition, SSAS sponsoring employers may struggle to make loan repayments to the scheme, due to cashflow issues. At the same time both members and employers may find themselves unable to contribute as much as they would have liked to the scheme, hence missing out on valuable tax relief.

In this blog, however, I would like to focus on one particular issue that I am discussing with several clients: the tenant of a scheme’s property facing difficulty paying their rent as it falls due.

Can we grant rent deferment/holidays?

Where your tenant is a third (or “unconnected”) party, you can essentially reach any terms that the two of you agree on. This includes rental deferments or holidays. Of course, any agreement made between you and an unconnected tenant is “commercial” by definition.

Any periods where rent is not paid will have a negative impact on your retirement savings, especially in the short-term. That said, as the owner or landlord of the property, you may see implicit value in taking a considerate approach, with the intention to maintain a good relationship with a tenant who you want to keep happy (and paying rent!) long after the pandemic is over. This is simply one of the conundrums a proprietor takes on.

What is HMRC’s view about “connected” parties?

For obvious reasons, HM Revenue & Customs (HMRC) are much more interested in “connected” party transactions (such as those between the SSAS and its sponsoring employer or one of its members). 

Under normal circumstances, the SSAS trustees should always take care to document that any such transactions take place on an “arm’s length” basis. 

For property-related transactions, evidence of this would typically be in the form of an independent valuation and/or rental opinion. If connected parties are treated more favourably than a third party would be, the Scheme Administrator has a duty to report the transactions to HMRC, which could result in penal tax charges.

However, these are not ‘normal’ circumstances. HMRC have recognised this in their “Pension Schemes Newsletter” of March 2020, in which they give assurance that, as long as they are granted on an ‘arm’s length’ basis, “rental holidays” (or, in other words, the deferment of rental payments) can be agreed without independent valuations taking place. This is somewhat uncharacteristic of HMRC, although definitely welcomed.

". . . the deferment of rental payments can be agreed without independent valuations taking place. This is somewhat uncharacteristic of HMRC, although definitely welcomed."

Other considerations

Whatever decision is reached, the SSAS’s other financial affairs need to be borne in mind. For example, any pensions in payment may need to be reduced and/or paused until any agreed rental deferments have ended. 

Perhaps more importantly, if a loan repayment holiday cannot be negotiated with the lenders to the SSAS, then failure to meet those obligations may lead to default. 

There may also be larger, one-off, commitments on the near horizon, such as the settlement of lump sum death benefits, or tax charges. 

If you would like to talk about this topic or have any questions in general, please get in touch with your usual Barnett Waddingham contact to find out how we can assist you. Alternatively, please contact me below.

For more analysis and insight about the impact Covid-19 may have on your pension arrangements, please visit our self-invested pensions hub. 

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