Pension Property Transactions: Unlocking the Potential of your SIPP or a SSAS

Posted by on 23 Apr 2025

For business owners and investors seeking a tax-efficient way to invest in commercial property, using a pension scheme like a SIPP (Self-Invested Personal Pension) or SSAS (Small Self-Administered Scheme) can offer a powerful strategy.                       

These pension vehicles can be used to purchase commercial property directly, creating long-term investment opportunities, facilitating leaseback arrangements for owner-occupiers, and providing rental income to support retirement. However, while the potential rewards are attractive, the legal landscape surrounding these transactions can be complex.

At AST Hampsons, we regularly advise clients in Rochdale, Bury, and across England on commercial property transactions involving pension schemes. Whether you’re an investor, landlord, business owner, or pension trustee, here’s what you need to know.

Understanding the Legal Process

Purchasing a property through a SIPP or SSAS involves several key legal steps:

1. Due Diligence: Just like any commercial property transaction, due diligence is essential. We investigate title, check planning and regulatory compliance, and review any existing leases or occupiers.
2. Trustee Involvement: With a SIPP, the pension provider’s trustee will usually be a professional body, while in a SSAS, the trustees may include company directors or members of the scheme. The trustee must be party to the purchase and lease documentation.
3. Pension Scheme Rules: All transactions must comply with HMRC regulations and the scheme’s specific rules. This includes restrictions on residential property investment and ensuring the transaction is at arm’s length if the purchaser is connected to the seller.
4. Lease Arrangements: If the property is to be occupied by your business, a formal lease between the pension and the business must be drawn up. This lease must reflect market rent and comply with commercial leasing norms.

Who Benefits from This Structure?

• Business Owners: Many clients wish to use pension funds to purchase premises for their own business. This enables them to pay rent back into their own pension scheme rather than to a third-party landlord.
• Investors and Landlords: Others acquire commercial property via a pension purely as an investment, letting it to third-party tenants to generate rental income.
• Property Owners: Some may already own commercial premises personally or through a company and wish to sell the property to their pension fund, subject to valuation and compliance.

Each scenario requires careful legal structuring to comply with pension rules and avoid unintended tax consequences.

Tax Benefits and Legal Risks

One of the main attractions of using a SIPP or SSAS for property investment lies in the potential tax advantages, including:

• Rental income generated by the property is usually received tax-free within the pension.
• The property is exempt from Capital Gains Tax on disposal.
• The purchase is usually VAT-efficient, particularly when registered for VAT and managed properly.

However, it’s essential to seek specialist tax advice from an accountant or financial adviser before proceeding, as there can be complications, particularly if VAT is involved or if the property is transferred from a connected party.

From a legal standpoint, risks include:

• Breach of HMRC rules, which can lead to tax penalties.
• Poorly drafted leases between the business and the pension fund, which can affect enforceability and tax treatment.
• Liquidity issues within the pension if the property is vacant or difficult to sell.

That’s why legal input is essential from the outset to ensure compliance and protect your pension investment.

Leaseback Arrangements: Opportunities and Challenges

A common structure we assist with is the leaseback arrangement, where a business sells its trading premises to the pension scheme and then leases them back. This can:

• Release cash into the business without giving up the premises.
• Ensure rent payments go into the pension, supporting long-term retirement planning.
• Potentially offer Inheritance Tax advantages (subject to financial advice).

However, there are legal and commercial challenges to consider:

• The lease must reflect market terms and be properly documented.
• There must be a clean break between business and pension ownership to satisfy HMRC.
• If the business cannot meet rent obligations, the pension fund’s investment is at risk.

We guide clients through these transactions, liaising with pension administrators, valuers, and lenders to ensure every element is in place.

Final Thoughts

Whether you’re acquiring new premises, investing for long-term returns, or exploring a leaseback, purchasing commercial property through a SIPP or SSAS can offer strategic and financial advantages. But it’s not without complexity. Every transaction must be carefully structured and legally compliant to protect your pension and ensure it works for your goals.

At AST Hampsons, we have the experience to guide you through the process from start to finish, whether you’re a business owner, investor, or pension trustee. If you’re considering using your pension to invest in property, or want to know if it’s the right move for you, get in touch with our commercial property team today.

We’ll help you understand the risks, highlight the opportunities, and make sure your property investment supports your long-term plans visit our website HERE.