It’s not just large pension funds who invest in commercial property, individuals can also invest in commercial property via their SIPP’s and SSAS’s pension pots.
Many business owners purchase their business premises within their pension wrapper and then put a lease in place to their business. Rather than pay rent to a third party landlord, the business pays monthly or quarterly rental income to the pension. The key advantage here is that rent being paid from the business to the pension is still a tax-deductible business expense.
Pensions can also invest in any commercial property investment with a third party tenant.
In both of the above cases:
- the pension wrapper can leverage its purchasing power by using debt
- the rental income is tax exempt
- any capital appreciation of the property over time is also tax exempt
Owning a commercial property within a pension wrapper is subject to strict HMRC rules and regulations (the commercial property cannot include any residential element) so it is important to speak with an expert before embarking down this route.
Photo by Visual Stories || Micheile on Unsplash
