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With changing pension rules, should you use a ‘SIPP’ to invest in commercial property?

Posted on October 13, 2015

Many people are seeing the benefits of a Self-Invested Personal Pension (SIPP), one of the Government’s latest schemes designed to allow more flexibility on pensions. Coodes Partner and Head of Commercial Property Helen Willett explains why this can be a good option for investing in a business property – as long as you are aware of the potential pitfalls.

“One of the key attractions of using a SIPP to invest in commercial property is that any growth in the property value is free from Capital Gains Tax. There is also no Inheritance Tax Liability – a stark contrast to the 50% maximum for business property relief held outside a SIPP.

“There are other immediate business benefits. If your business is leasing the property from your SIPP, the rent your business pays is an allowable business expense and you also get a tax free rental income.

“While these benefits are attractive, you should get advice from a solicitor who has relevant experience of dealing with these types of transactions because there are legal peculiarities around SIPPs. For example, while many buyers are prepared to take a commercial view on issues such as environmental risk, lack of formal rights of access or flood risk, pension funds will not take such risks.

“The property will be tied up in a formal arrangement whereby you can’t deal with the asset without the involvement of the trustees. So you will also lose an element of control, which can be frustrating.

“There are a number of other areas that require expert legal handling. For example, the occupation of the premises will need to be formalised with a lease so that rent is payable into the pension fund, even if the pension owner effectively owns or controls the business that occupies the property.

“The legal issues that arise when buying commercial property through a pension most frequently result from the fact that that the pension assets are no longer under the direct control of the pension owner. This means that the pension trustees will have regulations which govern the way in which the property is acquired and held. Your solicitor should be able to talk through the implications of this.

“A SIPP can be a really good option but it doesn’t work for everyone. Before making a decision on whether or not to invest in commercial property through a SIPP, seek legal advice so you know that this is the right decision for the future, as well as for your business now.”

For more information on this or any commercial property enquiries contact Helen Willett Head of Commercial Property at Coodes on 01736 362294 or email

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