A SIPP is a Self-Invested Personal Pension designed for individuals who want more flexibility over their pension scheme investments. Using a SIPP enables you to invest in a wide range of assets, including commercial properties, provided all transactions follow HMRC rules and deliver no personal benefit to the member.
A SIPP can be used to Purchase a Commercial Property, generate rental income, and benefit from tax-efficient property investment. Rental income is paid directly into the SIPP, and capital appreciation is sheltered from capital gains tax, provided the scheme remains compliant.
When buying a property, it is strongly recommended to work with an adviser experienced in SIPP commercial property investment to ensure every property purchase meets HMRC requirements.
A Small Self-Administered Scheme (SSAS) is a trust-based pension typically used by business owners, where members also act as trustees. A SSAS property may be used as business premises, giving directors significant flexibility. Like SIPPs, a SSAS can invest in commercial properties but must avoid residential property unless any residential element is negligible or exempt.
The difference between a SIPP and SSAS mainly comes down to control. SIPPs rely on SIPP providers for administration, while SSAS members administer the scheme themselves, meaning they own the property through the trust collectively.
• SIPPs are individual, while SSAS are employer-sponsored trust schemes.
• With a SSAS, members are trustees, directly controlling the management of the property.
• A SSAS property can be used to support business activities, including leasing the building back to the company if done on an arm’s length and commercial basis.
Both SIPPs and SSAS can Hold Property, but the responsibilities and freedoms differ. Understanding SIPPs and SSAS helps determine which is appropriate.
HMRC Regulations require that a SIPP or SSAS may only purchase commercial properties and not residential property, except where a minor residential element is unavoidable. All transactions must follow HMRC rules, demonstrating:
• Market value confirmed by a RICS valuation
• No personal benefit
• Commercial lease terms
• Full documentation in case HMRC reviews the property purchase
Any breach can lead to a significant tax charge.
The trustee is the legal owner of the property on behalf of the pension. They must:
• Conduct Due Diligence before purchasing a property
• Ensure the property is used solely for commercial purposes
• Oversee maintenance, insurance and compliance with minimum energy efficiency standards
• Ensure all rent paid to the SIPP is correctly accounted for
• Engage a property manager if necessary
Where members are trustees (as in a SSAS), they must ensure no improper benefit is received by any Connected Party.
Transactions involving a connected party (the member, family, or their company) must be on arm’s length terms. Examples include:
• Leasing a shop that is leased to the member’s business
• A SIPP wanting to purchase a commercial property from a member’s company
• Selling a property (selling a property or sale of the property) to the scheme
An independent valuation is mandatory, and the terms of the lease must match those offered to third parties.
Only commercial properties qualify for holding a commercial property within a SIPP or SSAS. Suitable options include:
• Offices
• Industrial units
• Retail units
• Warehouses
• Land for commercial purposes
Properties with a residential element may be allowed if the residential element does not render it Residential Property under HMRC rules.
Investors should consider potential rental income, location, and long-term value of the property.
The trustee will:
Instruct a RICS valuation
Agree the purchase price
Arrange financing if the SIPP can borrow
Ensure the transaction is on a commercial basis
Complete drafting of commercial lease terms
Confirm the property will be held in a SIPP or SSAS according to regulations
The purchase within the SIPP or SSAS is complex, so professional financial advice is strongly recommended.
A SIPP can borrow to fund the purchase of a Property. Under HMRC rules, the scheme can borrow up to 50% of the net fund value. Borrowing must be at market value interest rates and on fully commercial terms.
Consider how rental income will support mortgage repayments and other business expense obligations.
When the SIPP or SSAS owns the property, the trustee becomes a landlord. Responsibilities include:
• Ensuring safety standards
• Managing tenants
• Maintaining the property
• Conducting rent reviews
• Keeping lease terms compliant
• Ensuring the property remains suitable for investment
Failure to meet obligations may lead to financial and regulatory penalties.
Key tax advantages include:
Tax Efficiency depends on strict adherence to HMRC regulations.
The purchase within the SIPP or SSAS is complex, so professional financial advice is strongly recommended.
Many trustees use a property manager to handle tenant relations, maintenance, and regulation compliance. Nonetheless, the trustee retains final responsibility for ensuring every decision benefits the pension fund.
Understanding SIPP property rules, HMRC guidance, and the differences between a SIPP or SSAS is vital when investing in commercial property. With the right adviser, compliant structures, and careful management, property held within a pension can offer long-term growth, reliable rental income, and significant tax benefits.
This information is provided for general guidance only and should not be considered financial advice. You should seek independent, qualified financial advice before making any investment decisions.
For an in-depth look at the rules of property purchase, see our detailed guide.
Discover how commercial property works within a SIPP and the significant benefits it offers.
