SIPPs: Government rules out residential property in SIPPs


iStock_000017929895_ExtraSmallAfter raising hopes residential property might become an allowable investment within a SIPP (Self-Invested Personal Pension) the Government has revealed today it will not be pursuing plans first announced earlier this year.

In his last Budget, Chancellor George Osborne announced he was looking at changing the rules, to allow residential property to be held in a SIPP when it was the result of a conversion from a disused commercial building.

Whilst many SIPP investors were initially keen on the proposals, they were greeted by a mixed reaction from SIPP providers , some of whom were concerned over the policing of the new rules.

After a period of silence on the topic since the Budget, HM Revenue & Customs (HMRC) has now written to SIPP providers to confirm the idea will not now go ahead.

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Writing to the Association of Member-directed Pension Schemes (AMPS), HMRC said: “Our findings were that the benefits of changing the tax rules in this area, in terms of encouraging conversion of unused space in commercial properties in high streets and town centres to residential use, would be marginal at best.”

The letter continued: “The Government’s conclusion was these benefits would not outweigh the costs of complicating the tax code and the risk of reduced tax take that would result from changes to the tax rules at a time when the Government is looking to reduce the deficit.”

“The Government has therefore decided not to make any changes to the existing rules applying to residential property and Investment-Regulated Pension Schemes at this time. As with all areas of the pension tax rules, this policy will be kept under review.”

Responding to the news, Andrew Roberts, Chairman of AMPs, commented: “The Government has concluded that allowing SIPPs to convert unused commercial premises to residential use will not provide much additional housing stock and so does not want to spend time introducing complex additional rules. However, it is actually a missed opportunity to clarify the legislation that defines when a property is designated as residential.

Roberts continued: “I would hope that Government can now consider the impact of empty business rates on pension scheme property investments and whether that policy is achieving its aims. Paying rates on void commercial property can place a strain on schemes especially where there are no ongoing contributions. With reducing pension allowances, this is now often the case.”

Commercial property in a SIPP

With very limited exceptions, only commercial property can be held within a SIPP or indeed a SSAS (Small-Self Administered Scheme).

This investment option is particularly popular with business owners, who prefer to own their premises rather than pay rent to a landlord.

The tax advantages also make it a popular option for commercial property investors.

However, there are disadvantages, especially in relation to liquidity and diversification, which means it is not an option for all.

Would you like to buy a property with your pension?

Our team of Independent Financial Advisers are experienced in advising SIPP investor’s about the advantages and disadvantages of investing in commercial property.

If you would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email