Buying Commercial Property With a SIPP

Buying commercial property with a self-invested personal pension (SIPP) could help diversify your retirement portfolio. Here, we explain whether you can purchase commercial property in a SIPP, how the process works, examples of available SIPP providers, the rules to be aware of, and where to get reliable professional advice.

Can you buy commercial property in a SIPP?

Yes, it is possible to buy commercial property using a SIPP, provided the property meets HMRC rules and the SIPP pension provider allows direct commercial property investment.

Unlike residential property, most types of commercial property are permitted within a SIPP. This means you can use your pension funds to purchase qualifying commercial premises either outright or by borrowing, subject to some conditions.

Not all SIPPs allow commercial property, so the type of SIPP you hold (or plan to open) is crucial.

How does buying commercial property work?

Buying commercial property with a SIPP involves your pension, not you personally, owning the asset. So, it’s a concept similar to purchasing a buy-to-let property using a limited company, but obviously, it must be a business premises.

In practice, this is how the process works:

• The property is purchased in the name of the SIPP trustee.

• You can buy the property outright or borrow funds.

• Rental income is paid directly into the SIPP like it’s a business.

• Ongoing costs are paid from your SIPP fund.

• Any growth remains within the pension and is not subject to UK capital gains tax (CGT).

In some cases, the SIPP can lease the property to your own business, provided the lease is on a commercial, arm’s-length basis and all HMRC conditions are met.

SIPP rules for commercial property

Here’s an overview of the current HMRC SIPP commercial property rules:

• The property type must be classed as commercial, not residential.

• The SIPP must be the legal owner of the property.

• Any lease to a connected party (such as your own company) must be on full commercial terms.

• Rental income must be paid directly into the SIPP.

• You can borrow up to 50% of your SIPP's current value.

• The property cannot be used personally by you or individuals connected to you (like family members, for example).

If these rules are breached, significant tax penalties can apply, so professional advice is often essential to ensure your commercial property SIPP investment stays within the pension guidelines.

Types of property you can buy

Examples of commercial property types that you can typically hold in a SIPP include:

• Offices

• Shops and retail units

• Pubs

• Garages

• Warehouses and industrial units

• Business premises

• Agricultural land or land being developed for commercial use

• Care homes and hotels (subject to structure and use)

Mixed-use properties (such as a shop with a flat above it) can be more complex. The residential element is usually prohibited and may make the entire property unsuitable for a SIPP.

How to buy commercial property with a SIPP

Buying commercial property through a SIPP is more involved than a standard property purchase and typically follows these steps:

1. Confirm that your current SIPP (or proposed SIPP) allows commercial property investment.

2. Get independent advice to check your property and plans meet HMRC rules.

3. Ensure you can afford the investment and it fits in with your wider strategy.

4. Arrange borrowing, if required, for the property purchase within SIPP limits.

5. Appoint solicitors experienced in SIPP property transactions.

6. Complete the purchase in the name of the SIPP trustee.

If you’d like to discuss the process in more detail, we can arrange a free introductory chat for you with an independent, FCA-regulated pension adviser. You can get started below.

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Best SIPP providers for commercial property

Not all SIPP providers allow direct commercial property investment, for example:

• AJ Bell: Doesn’t currently support direct commercial property purchases within its mainstream SIPP.

• Hargreaves Lansdown (HL): Does not offer direct commercial property investment within its standard SIPP product.

• Standard Life: Availability depends on the specific SIPP structure; it is usually only available with adviser-led or bespoke SIPP arrangements.

Providers more commonly used for commercial property SIPPs tend to be more specialised and include options such as:

• Aviva (through specialist adviser-led SIPPs)

• Curtis Banks

• Barnett Waddingham

• Dentons Pension Management

Access to these providers is usually arranged through an adviser, as commercial property SIPPs are not execution-only products.

Is commercial property a good pension investment?

Commercial property can be a suitable pension investment for some people, but it’s not right for everyone.

Potential benefits of investing in commercial property with your SIPP pension include:

• Long-term rental income paid into a tax-efficient pension wrapper

• Diversification away from stock market and bond investments

• Potential capital growth over time

• Commercial property can be more predictable than residential investments

However, potential drawbacks include:

• Illiquidity (it can take time to sell a commercial property)

• Strict rules from HMRC to follow

• Commercial property held in a SIPP may be subject to VAT

• Concentration risk if the property makes up a large part of your pension portfolio

• Still have to deal with things like tenant risk and void periods

• Typically requires ongoing professional advice, planning and management

Whether commercial property is appropriate depends on your overall pension value, risk tolerance, retirement plans, and the role the property plays within a wider strategy.

Get independent pension advice today

Buying commercial property through a SIPP isn’t a decision to rush, and it’s essential to understand the rules and long-term implications before using your pension to invest in property. It’s crucial to get advice from a pension adviser with direct experience using a SIPP for commercial property investment.

Here’s why people trust us to help them get advice if they’re considering buying commercial property with a SIPP:

• Independent advisers with access to the widest range of providers

• Free initial pension chat with no obligation to proceed further

• Get tailored pension advice for commercial property

• Access to exclusive SIPP providers and pension products

If you’d like a free, no-obligation chat with a qualified pensions adviser to discuss buying commercial property within a SIPP, you can get started here.