Using a SIPP or SSAS to buy Commercial Property - the basics.

Investing in commercial property through your self invested pension scheme can be a powerful way to build long-term wealth. In this article, we have outlined some common questions from SIPP and SSAS members who are considering buying or currently hold commercial property within their scheme.

Can my SIPP or SSAS own commercial property?

Yes. Both Dentons’ SIPPs and SSASs can invest in UK commercial property including offices, warehouses, shops, and public houses. Commercial property with a residential element can only be accepted on very restricted terms, but residential property on its own is not allowed. The rules around property ownership are identical across SIPP and SSAS.

Who owns the property?

There is a misconception that you, as the client, own the property, but this is not the case – the pension scheme owns the property. The pension scheme trustees own the commercial property.

Can my business occupy the property?

Yes. Your business can lease the property from your SIPP or SSAS. This is known as a ‘connected party transaction’. A formal, commercial lease agreement must be in place and the rent set at a market value – as determined by a RICS Registered Valuer.

Do I need a lease if my own company is using the property?

Yes. Even if your pension scheme is the landlord and your business is the tenant, a lease is essential. This protects the SIPP or SSAS, satisfies HM Revenue & Customs (HMRC) rules, ensures clarity around rent, and sets responsibilities for maintaining and insuring the property.

How is rent decided?

Where the property is leased to an unconnected third party, the rent may be set at the discretion of the property owner and agreed through negotiation between the owner and the prospective tenant. While a formal valuation is not a legislative requirement in these circumstances, it is strongly recommended that the rent reflects the current open market value and is supported by appropriate evidence (e.g. comparable transactions or independent advice). This helps demonstrate that the arrangement is on commercial, arm’s length terms, which is a key requirement for pension scheme compliance.

Where the property is leased to a connected party, the pension scheme trustees will commission an independent professional surveyor who is MRICS or FRICS qualified and is a Registered Valuer, to determine the open market rent payable based on the proposed lease terms.

Any subsequent rent reviews should also be conducted on commercial terms in line with the lease provisions. If material improvements are made to the property, or lease terms are altered, a reassessment of the rent may be appropriate.

What happens to the rental income?

All rental income from tenants is received gross and is free from income tax. Rental income payable by the tenants can be treated by them as a business expense for tax purposes and can reduce the income and corporation tax liability of the tenant.

The rental income is paid directly into the SIPP or SSAS bank account where it can be held as cash or reinvested.

How often does the property need to be revalued?

There is no requirement for a SIPP or SSAS to conduct periodic valuations of its commercial properties. However, a valuation will typically be required for the following events:

• Purchase from, or sale to a connected party
• Lease rent review/renewal
• Retirement or death

Can I buy a property jointly with my company or another person?

Yes. Your Dentons’ SIPP or SSAS can jointly own property with:

• Other Dentons’ pension schemes
• Pension schemes from other provider(s)
• A business and/or individual – including you as the client. 

Ownership is recorded in percentage terms and each party will receive rental income in the appropriate percentage proportion.

Can the scheme borrow to help fund a property purchase?

Yes. Borrowing is allowed up to 50% of the net value of the pension scheme at the time of borrowing, minus any outstanding scheme borrowing.

Can the scheme fund property improvements?

Yes. The SIPP or SSAS can pay for property enhancements or development work provided the improvements are commercially sensible, are paid for from the pension fund and the work is properly documented. The pension scheme should not, however, be funding items which can be touched and moved such as desks, chairs, partitions, computer equipment and so on, as these would be treated as “taxable property” by HMRC.

Who pays for repairs and running costs?

For a tenant who will normally be on a full ‘repairing and insuring lease,’ they are responsible for covering these costs.

What happens to the property when I retire?

When you retire you can:

• Keep the commercial property within the SIPP or SSAS 
• Sell the property to release capital or 
• Use the rental income as pension income. 

The commercial property can remain within the pension wrapper and continue to grow tax-free.

What happens to the property when I die?

The commercial property can be:

• Passed to beneficiaries within the scheme
• Sold, and the proceeds paid into the beneficiaries’ drawdown fund
• Retained in a pension scheme, continuing to generate income for the benefit of the SIPP beneficiaries.

This usually happens free of inheritance tax (IHT). However, new IHT rules are due to come into effect from April 2027 under current Government proposals.

How will the new IHT rules on pensions affect my holding of commercial property within my SIPP/SSAS?

From 6 April 2027, all unused pension funds, including commercial property owned by your SIPP or SSAS, will be brought into your estate for Inheritance Tax (IHT) purposes. Payments of death benefits to a spouse or civil partner will remain exempt from IHT under the proposals.

Will this mean that commercial property ownership in a pension scheme is no longer a viable option?

Commercial property investment remains an attractive pension scheme investment. Please see our recent article- Pension Inheritance Tax Proposals - further considerations.

You should seek regulated financial advice if you are unsure about what types of investment you should make or hold within a SIPP or SSAS. 

For more information download our Commercial Property Guide.