Can I use my pension to buy commercial property?

Yes, through a SIPP or a SSAS. Commercial property is not taxable property, so the pension can own it, receive the rent free of income tax and sell it free of capital gains tax.

Get a complimentary health check Talk to an adviser

If your own company rents it, the rent has to be a full commercial rent.

The advisers for this subject: Sunny Bharj and Tony Springer

Request a meeting Pension carry forward calculator

Commercial and residential property

Commercial property: Offices, shops, factories, warehouses and other business premises. A whole hotel owned by the scheme is commercial property.
Residential property: A building used or suitable for use as a dwelling, with its garden or grounds. A holiday let and a share in a hotel or a timeshare are caught. Can a SSAS buy residential property?
A flat above a shop: Not caught where it is used in connection with business premises the scheme holds and is occupied by somebody who is neither a member nor connected with one, such as a trader living above the shop the scheme lets to them.
A caretaker's flat: Not caught where the occupier is an employee required to live there by their job, and is not a member, connected with a member, or connected with the employer.
Institutional buildings: Care homes, children's homes, student halls of residence, hospitals, hospices and prisons are not caught.

Renting it to your own company

Your company, or you, can rent property the pension owns, provided the full commercial rent is paid. A shortfall is taxed as an unauthorised payment.

The same applies to the purchase. Where the pension buys premises from you or your company, the price has to be market value, and any amount paid above it is an unauthorised payment. An independent valuation of the price and the rent gives you evidence of both.

Borrowing to buy

A pension scheme can borrow up to 50% of the net value of the fund, measured immediately before the borrowing. In a SIPP the limit is tested on your own arrangement. Borrowing above the limit brings a 40% scheme sanction charge on the excess.

Tax inside the pension

Rent is free of income tax while the property is held for the pension.
A gain on sale is free of capital gains tax.
A property held through a property investment limited liability partnership does not get either exemption.

If your company is the tenant, the rent must be the full commercial rent. A shortfall is taxed as an unauthorised payment.

Where this fits

Check the rent, the price and the scheme's borrowing limit before the pension commits to a purchase.

SIPPs and SSASs Get a complimentary health check

The advisers for this subject

Sunny Bharj

Independent Financial Adviser

Tony Springer

Independent Financial Adviser

Advising through Equity & General Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority. Check the firm on the FCA register under number 474163.