• The key drivers in most instances are the tax advantages afforded by using a pension scheme to purchase a commercial property.  Pension contributions and any related basic rate tax relief can be used to purchase a property and at the other end of matters an enhanced sale price will not attract Capital Gains Tax.  A pension scheme leasing out a property as an investment will also benefit from an income tax free position in respect of any rental paid.  Finally the property placed in a pension scheme will not attract Inheritance Tax as it is deemed to be excluded from the estate of the deceased member/beneficiary.
• A SIPP or SSAS can borrow by way of a commercial mortgage/standard security secured over the property in question.  The borrowing however, must not exceed 50% of the net market value of the pension scheme's assets at the date of purchase.  We have seen differing attitudes amongst pension providers as to permitting funded transactions however it does allow a party placing commercial property into their pension the flexibility of raising finance in this way (albeit capped).
• A pension scheme can acquire commercial property via various structures.  The options include the acquisition by the pension scheme of commercial property with a lease to a connected party (the beneficiary/member's business itself) or on more of a pure investment basis to an unconnected third party.  In the case of the purchase from and lease to a connected party then the purchase price and rent payable must be clearly evidenced as being at open market rate by an RICS registered valuer.
• More complex scenarios however can allow the pension scheme to purchase jointly with other parties including other SIPP/SSAS structures, companies or individuals.  In certain instances a pension scheme may participate as part of a larger syndicate of pension schemes.  If other joint or syndicated transactions are undertaken, it is vital that legal agreements are entered into by all parties setting out the conditions applicable to the purchasing entity.   We have also carried out a number of in specie transfers: where the pension scheme acquires a commercial property from another pension scheme belonging to the same beneficiary.  However, the recent issues surrounding the different tax treatment of such transfers when it comes to Stamp Duty Land Tax and Land and Buildings Transaction Tax has reduced the appetite for such transactions in Scotland where, unlike England, tax will be charged on a transfer.
• In the same way as with any other commercial property transaction Value Added Tax is applicable in the normal way with the specific rules applying to transfers of a going concern being equally valid in any SIPP or SSAS acquisition.  The pension scheme trustees in these cases will require to undertake the necessary VAT registrations and elections as appropriate and at the relevant time in order that the correct VAT position is established by the scheme.

Finally, one should bear in mind that residential properties are not permitted to be held in SIPP or SSAS structures under current rules and if they do enter a SIPP or SSAS, HMRC will impose penal tax charges.  In many instances what is a residential property may appear clear cut however we have encountered situations where properties are a culmination of business facilities with accommodation on site for owners/janitors/managers.  Commercial property with such a residential element is not permitted unless it is clear that the residential element is an integral part of the commercial property and ties into the running of the business carried out at the property or the employment of the occupant.  The person occupying cannot be connected to the pension member/beneficiary.  A SIPP or SSAS can own property being developed as residential, however needs to sell before any habitation certification is issued.

The above are a flavour of some of the considerations that come into play in any SIPP or SSAS purchase of commercial property - although transactions can run as in any other commercial property transaction there are pitfalls and guidance by an appropriately experienced specialist is always recommended.