Commercial property · SSAS sale and leaseback
Selling your business premises to your SSAS and leasing them back
If your company owns its premises and its directors have a small self-administered pension scheme (SSAS), the scheme can buy the premises and lease them back to the company. The sale can release some or all of the capital tied up in the building, depending on any existing mortgage, tax and transaction costs. After completion, the company pays rent to the pension scheme under the new lease.
It works only if the property qualifies, the price, rent and lease terms are genuinely commercial, and any borrowing stays within the limits. We handle the property and lease side, working alongside your scheme administrator, financial adviser and accountant.
Written by Sangita Gohil, Solicitor, admitted in 2000 · Last reviewed
How it works
- 01The trustees confirm with the scheme administrator that the scheme's trust deed and rules permit the purchase, and any borrowing.
- 02An independent valuer gives the market value of the property and the market rent.
- 03The scheme buys the premises from the company (or from you, if you own them personally) at market value.
- 04The trustees grant the company a lease on commercial terms, at a market rent.
- 05The company pays the rent into the scheme.
We also act where the SSAS buys premises from an unconnected owner and lets them to your company. Many of the lease and pension points are the same.
The rules that make or break it
The property
SSAS property investment is in practice confined to commercial property. Residential property, and some mixed-use property, triggers tax charges. A shop with a separate flat above it, with its own entrance and no connection inside, is treated as two buildings: the flat is residential and the shop is commercial. If the flat connects to the shop inside, HMRC treats the whole building as residential.[1] Properties with flats, caretaker accommodation or development potential need specific advice before exchange.
Commercial terms, from start to finish
The price, the rent and the lease terms must all stand up as arm's-length terms: what unconnected parties would agree. A company renting scheme property has to pay the commercial rent.[2] Independent valuation evidence of the price and the market rent will normally be needed. The same goes for anything agreed later, such as rent reviews, rent-free periods, payment plans and lease variations. If value passes from the scheme to the company or a member on terms that aren't commercial, HMRC treats it as an unauthorised payment, and there is a separate charge on the scheme as well.[3]
Borrowing
A SSAS can borrow to help fund the purchase, but its total borrowing is generally capped at 50% of the scheme's net value immediately before the borrowing. Existing borrowing counts towards the limit, and the property being bought doesn't count towards the value.[4]
The trust deed and the trustees
The scheme's trust deed and rules must permit the investment. We confirm with the trustees and the scheme administrator at the outset who needs to buy, borrow and sign.
The lease
The lease has to work both as an ordinary business lease and as a pension scheme investment. We cover:
- the length of the lease, break rights, and any rent-free period
- rent review
- repairs, insurance and uninsured risks
- service charge, where there is one
- use, alterations, assignment and subletting
- the Landlord and Tenant Act 1954: whether the company has a right to renew
- what happens at the end of the lease
- what the trustees can do if the company defaults or becomes insolvent
For more on the lease itself, see our commercial lease review.
Who we act for
We can act for the SSAS trustees, the company, or both. If both ask us to act, we first check that you share a clear common purpose and agree on how to achieve it, and that acting for both is reasonable and in both clients' interests. Both clients must give informed consent in writing, and we put appropriate confidentiality safeguards in place.[8] If the interests of the company and the trustees diverge during the transaction, we may have to stop acting for one or both clients, who may then need separate representation.
Tax points to check
The transaction can involve:
- Stamp Duty Land Tax: pension funds pay it on the same basis as any other buyer.[5]
- VAT, including whether the seller has opted to tax the property.[6]
- Corporation tax if the company sells, or capital gains tax if you sell personally.
Don't assume that transferring the property into the scheme instead of paying cash (an "in specie" contribution) attracts tax relief. HMRC won the leading case on that point.[7]
Take advice on the transaction from your accountant and pension adviser before the terms are agreed. We coordinate the legal documents with that advice, but we don't give tax or investment advice.
What we do
- review the scheme documents relevant to the purchase and who signs
- the sale contract and transfer
- title checks, searches and enquiries for the trustees
- the lease to the company
- the property and security work required by the scheme's lender, where the lender permits us to act and our quotation includes that work
- the SDLT return, if our quotation includes it
- completion and registration at HM Land Registry
- working with the scheme administrator, valuer, accountant and financial adviser
What we don't do
We advise on the property transaction. We don't advise on:
- whether setting up or using a SSAS is right for you
- pension transfers
- investment choices
- tax relief
- the financial merits of the deal
Those sit with your financial adviser, accountant and scheme administrator.[9] The scheme administrator remains responsible for the scheme's tax administration and reporting. Your quotation will say who handles the SDLT return, the Land Registry application, the VAT paperwork and any lender reporting.
We also don't cover:
- valuations
- building or environmental surveys
- asbestos advice
- planning advice beyond what the documents and searches show
- advice to a lender, unless agreed separately
What to send us
- the scheme's trust deed, rules and any amendments
- the trustees' and scheme administrator's details
- the scheme's current value and details of any existing borrowing
- heads of terms for the sale and the lease
- the valuation reports, or the valuer's details
- title details, and any mortgage on the property
- VAT registration, and evidence of any option to tax
- your accountant's and financial adviser's details
- the lender's terms, if the scheme is borrowing
- who occupies the property, and any residential part
How it works with us
- 01Tell us about the property, the scheme and your timetable through the enquiry form.
- 02We check whether we can act, and for whom. We then send you a secure link to upload the documents.
- 03We confirm a fixed fee, the scope and who does what, in writing.
- 04We complete identity checks and open the file.
- 05We take the sale and the lease through to completion and registration.
We quote a fixed fee once we've reviewed the transaction structure, the title, the lease, the tax instructions and any borrowing, and confirm it in writing before we start.
SSAS sale and leaseback: common questions
Yes, if the scheme's trust deed and rules allow it and everything is on commercial terms: a price supported by an independent valuation, and a lease at a market rent. Value passed from the scheme on non-commercial terms is treated as an unauthorised payment (HMRC Pensions Tax Manual PTM133700).
Sometimes. A flat with its own entrance and no inside connection to the commercial part is treated as a separate building. If the flat connects to the commercial part inside, HMRC treats the whole building as residential (PTM125200). Take specific advice, and get your scheme administrator's written confirmation, before you commit.
The trustees must deal with it as any landlord would: chase the arrears and use the remedies in the lease. A sponsoring employer renting scheme property has to pay the commercial rent, and a shortfall can be treated as an unauthorised payment (PTM121000).
Only on terms an unconnected landlord would agree. Speak to the scheme administrator first, get valuation advice to support the change, and document it properly. A concession that isn't commercial can shift value out of the scheme (PTM133700).
Generally up to 50% of the scheme's net value immediately before the borrowing, counting any existing borrowing. The property being bought doesn't count towards that value (Finance Act 2004 s.182; PTM124000). Your scheme administrator will confirm the figure.
Get valuation advice before the price and rent become binding, and in every case before exchange. Get tax advice early enough for it to inform the structure, and before either party makes a binding commitment.
No. The pension rules don't require it. Whether to contract out is a commercial choice for the trustees and the company, and the terms still have to be at arm's length.
Any existing lender's charge will usually need to be redeemed and discharged on completion, unless the lender expressly agrees another arrangement. If the scheme borrows, its lender takes new security, within the borrowing limit.
Yes, in appropriate cases. We first check that the company and the trustees have a substantially common interest, and that acting for both is reasonable. Both must give informed consent in writing, and we put confidentiality safeguards in place (SRA Code of Conduct for Solicitors, paragraph 6.2). If their interests diverge, we may have to stop acting for one or both of them, who may then need separate representation.
Often, yes. The SIPP provider must be willing to accept and administer the property investment, and each provider has its own requirements. The core registered pension scheme rules on borrowing and residential property generally apply, subject to the particular scheme and transaction (PTM124000; PTM125200).
Have a question that isn't here? Talk to a lawyer directly - we respond to all enquiries within one working day.
Sources
- HMRC Pensions Tax Manual PTM125200: residential property as taxable property, and shops with flats.
- HMRC Pensions Tax Manual PTM121000: a sponsoring employer renting scheme property must pay the commercial rent.
- HMRC Pensions Tax Manual PTM133700; Finance Act 2004, sections 174 and 181: value shifting, including through lease transactions.
- Finance Act 2004, section 182; HMRC Pensions Tax Manual PTM124000: the 50% borrowing limit.
- HMRC Stamp Duty Land Tax Manual SDLTM31800: no special SDLT rules for pension funds.
- HMRC Notice 742A: opting to tax land and buildings: VAT on commercial property and the option to tax.
- HMRC v Sippchoice Ltd [2020] UKUT 149 (TCC): transfers of assets are not "contributions paid" for tax relief.
- SRA Code of Conduct for Solicitors, paragraph 6.2, and SRA Glossary: acting for more than one client where interests may conflict.
- FCA Perimeter Guidance PERG 10 and PERG 12.6: pension scheme activities and pension transfer advice.
Also: Finance Act 2004 ss.183 to 185 and Schedule 29A; Landlord and Tenant Act 1954.
This page is general information about the law of England and Wales, not advice on your transaction. Last checked .
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