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        Updated: April 08, 2024

        Commercial Property SIPPs

        Learn about the tax advantages of buying and owning a commercial property within your pension

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        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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        When building up a nest egg, some people prefer to invest in tangible assets, like property, over stock market assets that can seem nebulous and mysterious. Others want to invest in both, to spread their risk across different categories.

        A self-invested personal pension (SIPP) gives you the freedom to invest in many different assets, including buying a commercial property. That can be useful for many people, particularly business owners who need their own premises. We’ll explain more in this guide.

        Can you use a SIPP to buy a commercial property?

        Yes, the ability to invest in commercial property is one of the advantages of this type of pension. However, not every SIPP is suitable for buying commercial property, so you’ll need to choose your SIPP provider carefully.

        There are three ways to use a SIPP to buy commercial property:

        Directly buying a property

        You can buy a commercial property (such as a premises for your own business) outright if you have the funds in your SIPP to do so. Or, you can borrow up to 50% of the net value of your SIPP from a bank or building society as a commercial mortgage. You might pool your funds with other SIPP holders to collectively buy a commercial property or properties.

        Transferring in a property

        If you already own a property, you can transfer ownership into your SIPP. You will no longer own the company personally, so the rental income and increase in value will go into your SIPP.

        Investing in a property fund

        You don’t have to own or buy a property to benefit from growth in the property market. You can also invest in a commercial property fund, which works by pooling money from multiple investors to buy and sell properties under the instruction of an investment manager.

        HMRC commercial property rules for SIPPs

        HM Revenue and Customs (HMRC) imposes no restrictions on what type of commercial property can be purchased through your SIPP. Its regulations allow you to own a wide variety of commercial property types, including shops, offices, warehouses, pubs, garages, hotels, and land that is to be developed for commercial purposes.

        The property can be abroad, although buying an overseas property can involve additional costs and exposes you to currency risk. The tax benefits of buying through a SIPP may not all apply in the country you buy a property.

        Residential properties cannot be owned through a SIPP. HMRC considers them to be taxable investments, so would apply a hefty tax charge if you were found to own one. Certain commercial properties with a residential element (such as a care home) sit outside these rules.

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        Advantages and disadvantages

        As with any investment, buying a commercial property with a SIPP has upsides and downsides.

        • Using a SIPP is usually the most tax-efficient way of buying a commercial premises for your own business
        • The business must pay rent to the SIPP at market value. For the business, the rent payments are deductible for corporation tax purposes. For the SIPP, the rental income is free from income tax and can be reinvested.
        • Given enough time, the property may increase in value
        • If you sell the property at a profit, you won’t need to pay capital gains tax
        • The property is excluded from your estate for inheritance tax purposes
        • Within your pension, ownership of the property can be passed on to a beneficiary without incurring inheritance tax
        • If your business fails or you are declared bankrupt, the property is protected
        • If a mortgage has been taken out to purchase the commercial property, part of the rent from said property will need to be used to pay-off the debt
        • If the value of the property falls, you’ll get back less than you invested if the SIPP is instructed to sell the property
        • Owning a commercial property can involve expenses such as maintenance costs
        • If you buy a commercial property with a SIPP, you may need to pay mortgage fees and solicitor’s fees
        • If you transfer a commercial property into a SIPP, you may need to pay capital gains tax and stamp duty
        • Property can take a long time to sell, which could leave you without cash when you need it

        How an advisor can help with a commercial property SIPP

        The rules around commercial properties and SIPPs are complex and it’s wise to seek expert financial advice before making an investment.

        A specialist SIPP advisor can:

        • Recommend the best SIPP provider that permits investment in commercial property, which include Barnett Waddingham, Dentons, and Standard Life
        • Discuss the various ways that owning a property this way will impact you, your business, and your pension
        • Ensure that you abide by HMRC rules, and therefore avoid expensive tax charges
        • Assess the level of risk you are exposed to through a property investment and whether that is within your personal tolerance
        • Suggest other investments that might be also suitable for you

        If you get in touch, we’ll arrange for a pensions advisor we work with, who has experience with all aspects of SIPPs and commercial property, to contact you straight away.

        Can a SIPP take out a commercial mortgage?

        Yes. Many mainstream lenders offer mortgages that allow you to buy a commercial property through a SIPP. Rates can vary considerably based on the property you’re buying, the performance of your business, and your personal credit history. Working with an experienced advisor will help you to get the best deal.

        Get matched with an independent pension advisor

        When making any decisions about your pension, you need to be somewhat cautious of the complex HMRC rules around taxes, allowances, etc. It’s easy, as an unqualified person, to make mistakes that result in large charges.

        So, we’d always recommend you speak to a pension advisor first. In the case of buying commercial property with a SIPP, it won’t just help you to avoid tax charges but could also open up opportunities to arrange your finances more tax-efficiently. If you’d like to speak to an advisor who specialises in SIPPs, give us a call on 0808 189 0463 or fill out this short form.

        Ask A Quick Question

        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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        Tony Stevens

        Tony Stevens

        Finance Expert

        About the author

        Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

        Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

        FCA Disclaimer

        *Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us as well as any of our own are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

        Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.