Managing commercial property within a SSAS

Purchasing a commercial property through a SSAS is often the point where advisers feel the most significant work has been completed. The property has transferred into the scheme, the lease has been agreed, finance has been arranged where necessary and the business continues operating from the same premises. From the client’s perspective, very little appears to have changed beyond who now owns the building. In our experience, however, this is usually where the more important part of the relationship begins because the property is no longer simply a business asset. It has become part of the pension scheme and needs to be managed within that framework for as long as it remains there.

That distinction can take a little time to adjust to because, in many cases, the same people remain involved throughout. The directors of the business are often the members of the pension scheme and also act as its trustees. They are still making decisions about the same building they have occupied for years, but they are no longer making those decisions solely as business owners. They also have responsibilities as trustees, and those responsibilities require them to consider what is in the best interests of the pension scheme rather than simply what is most convenient for the business at any given moment. Most of the time those two objectives sit comfortably alongside one another, but recognising that they are not automatically the same helps avoid many of the issues we see developing later.

One example we come across reasonably often is the payment of rent. From the perspective of a business owner, delaying a rental payment for a short period because cash flow is temporarily tight can seem entirely understandable, particularly when the rent is effectively being paid to a pension scheme that they also control. Once the property sits within a SSAS, however, the lease needs to operate exactly as it would between two independent commercial parties. The trustees have a responsibility to the pension scheme, and that means rent should continue to be paid on time and on the agreed commercial terms. The same principle applies to lease reviews, insurance obligations and many of the other responsibilities that accompany commercial property ownership. None of these requirements exist because the property is held within a pension scheme; they exist because the trustees have an obligation to demonstrate that the scheme is being managed on a fully commercial basis.

We see the same principles applying whenever a property begins to evolve. Businesses naturally adapt their premises over time, whether that involves refurbishing offices, extending industrial units, altering layouts or undertaking more substantial redevelopment projects. Much of that work can sit perfectly comfortably within a SSAS, but we always encourage clients to involve us before significant changes begin rather than afterwards. It is surprisingly common for somebody to assume that, because the property already belongs to the pension scheme, they are simply improving an asset they already own. In reality, some developments can alter the way HMRC views that property or introduce new considerations that need to be addressed before work progresses. Those situations are almost always easier to deal with when they are discussed early, while different options remain available.

That is one of the reasons we see our role continuing well beyond the original purchase. We are not property managers and we are not there to make day-to-day commercial decisions on behalf of the trustees. Our role is to help trustees understand how those commercial decisions interact with the pension legislation so that opportunities are not missed and unnecessary tax or compliance issues do not arise simply because a change to the property was viewed only through the lens of the business. Very often the conversation is simply about exploring an idea before it happens rather than solving a problem afterwards.

Looking back across the schemes we administer, the trustees who experience the fewest difficulties are not necessarily those with the simplest properties or the least ambitious plans. They are usually the ones who continue viewing the property as an active part of their pension strategy rather than a transaction that finished on the day the purchase completed. Businesses change, properties evolve and commercial priorities shift over time, but maintaining an ongoing dialogue between trustees, advisers and professional trustees means those changes can usually be accommodated without losing sight of the objectives that made the property purchase attractive in the first place.