What commercial property can a SSAS buy?

One of the first questions advisers usually ask us is whether a particular property can actually be held within a SSAS. On the face of it, that sounds like a relatively straightforward technical question. In practice, it rarely is. We often find that two properties which appear very similar at first glance can lead to completely different conversations because of the way they are owned, used or structured. Before we look at legislation, we usually try to understand what the property is, how it is being used and, perhaps most importantly, what the client is ultimately trying to achieve.

Where a property is being used wholly for commercial purposes, the position is often relatively straightforward. Offices, warehouses, industrial units, retail premises and many other commercial buildings can all be perfectly suitable investments for a SSAS. Commercial land can also be appropriate, whether it is already being used by the business or forms part of a wider commercial investment strategy. In those situations, the conversation usually moves quite quickly beyond the property itself and towards how the purchase should be structured, who currently owns it and how it fits within the client’s wider plans.

The questions become more interesting when a property sits somewhere between clearly commercial and clearly residential. Mixed-use buildings are a good example. A shop with a flat above it is often assumed to be unsuitable because of the residential element, but that is not always the case. We regularly find ourselves explaining that it is the structure of the ownership, rather than simply the appearance of the building, that determines whether the commercial element can be acquired by the pension scheme. Sometimes a relatively small structural change allows the commercial objectives to be achieved while remaining fully compliant with HMRC requirements.

That distinction is one of the reasons we encourage advisers to involve us early. It is surprisingly common for somebody to begin a conversation by explaining why a property cannot be purchased through a SSAS, only for us to discover that the issue lies with the proposed structure rather than the property itself. The legislation sets clear boundaries, but there is often considerably more flexibility in how a transaction is put together than people first expect.

There are, of course, some boundaries that are much clearer. Residential property cannot generally be held directly within a SSAS without creating significant tax consequences, and we regularly find ourselves dispelling the misconception that holiday lets, Airbnbs or similar arrangements somehow become commercial simply because they generate an income. They do not. The distinction under the pension legislation is much more specific than that, and misunderstanding it can prove expensive.

Equally, some properties that people initially assume fall outside the rules may be perfectly acceptable when particular conditions are met. Care homes are one example. They often generate questions because, although they involve residential occupation, certain types of regulated care provision can fall within specific HMRC exceptions. They require careful consideration, but they demonstrate an important point. Rather than relying on broad assumptions about the type of property involved, it is almost always better to look at the individual circumstances before reaching a conclusion.

The same principle applies to commercial development land. Purchasing land with the intention of developing commercial premises can work well within a SSAS, provided the project remains within the boundaries of the pension legislation. Development itself is not the issue. What matters is understanding how that development changes the nature of the asset over time. A project that begins as a commercial development may reach a point where different considerations apply, which is why we encourage clients to keep us involved throughout the life of the project rather than simply at the point of purchase.

Perhaps the biggest lesson we have learnt over the years is that deciding whether a property is suitable for a SSAS is rarely about applying a simple checklist. It is usually about understanding the commercial objective first and then considering whether the property, its ownership and the proposed structure all support that objective within the framework of the legislation. Sometimes the answer is that the property is entirely suitable. Sometimes it is that a different structure is needed. Occasionally the answer is that the proposal simply falls outside what a pension scheme can do. Our role is not to force every transaction into a SSAS. It is to help advisers understand which route best supports the client’s long-term objectives.