Holding residential property in SSAS or SIPP – what you need to know

Published by Lisa White on

Estimated reading time: 4 minutes 


When it comes to buying property in your SSAS or SIPP you need both knowledge and wisdom, especially where there is the possibility that the property could be deemed by HM Revenue & Customs (HMRC) to be residential property. You need the knowledge to know whether the property could be classed as residential, either at outset or at some point in the future, and the wisdom to know whether the property should be brought into the pension scheme, taking into account the risks involved.
"Knowledge is knowing that a tomato is a fruit. Wisdom is not putting a tomato in a fruit salad... "

What are the tax charges for holding residential property within a SSAS or SIPP?

The tax charges for holding residential property within a SSAS or SIPP can be significant and may have to be made paid by you personally. They include a potential tax charge of up to 70% of the value of the property when it is bought, an annual charge of 40% of the deemed income (at least 10% of the value of the property) and any other tax charges or penalties HMRC may apply. 

Capital Gains Tax will be applied when the property is sold and there is a chance that HMRC could look to de-register the pension scheme and claw back any tax relief that it has granted in the past.


I understand that most people appreciate that a main domestic residence is classed as residential property and cannot, therefore, be brought into their SSAS or SIPP tax-efficiently. However, that distinction is not always clear with other types of property. Take, for example, a building that has a shop on the ground floor and a flat above. You may think that the flat cannot be owned by your pension scheme tax-efficiently but the shop can because it is a commercial property. However, this is not necessarily the case. It would depend on a number of factors, including who owns the freehold of the building, whether the flat is self-contained, who occupies the flat, who leases the shop and whether there is any connection between the occupiers of the flat, the shop and the pension scheme.

What about a building used to provide holiday accommodation? Again, it would depend on, among other things, the layout of the property and its ownership. While it may not be possible to hold an Airbnb, bed and breakfast dwelling or caravan site in your pension scheme, hotels and hostels are sometimes exempt from being classed as residential. However, if the hotel or hostel comes with rights for you to use the property – for example, through a timeshare – it may lose this exemption. 

You may be considering buying a plot of land, obtaining planning permission and carrying out a residential property development. You would think that buying a plot of land would not cause any issues but if, say, the land is currently being used as a garden or for any other purpose for a neighbouring residential property, then your SSAS or SIPP could be deemed to hold residential property if the land is brought into your pension scheme. However, if the land has a derelict building on it that is not suitable for use as a dwelling, HMRC may not deem this to constitute residential property.

HMRC deem a property to be residential once it becomes habitable, but at what point does a property become habitable? When the structure is completed? When its utilities are connected? When it has received a ‘habitation certificate’?

If your SSAS or SIPP starts a residential property development, you will need to consider how you will get the properties out of your pension scheme before they are deemed to be habitable. Will anyone want to buy a partially-built house and what price will they pay for it? Would it instead be easier just to sell the land, once planning permission has been granted?

Another very important aspect to consider is the ownership of the property. You may have used your pension savings to buy the property in your SSAS or SIPP but that does not automatically mean that you ‘own’ the property and can, say, seek to develop it in isolation.

For trust-based pension arrangements like a SSAS or a SIPP, the owners of the property will typically be the trustees of the scheme.  As a member of a SSAS you will perhaps also be a trustee of the scheme and share the ownership of the property with the other trustees, in your capacity as a trustee. However, any development of the property must be agreed by all of the trustees, including the professional trustee, before the development commences.

For a SIPP, it is possible that the only trustee of the scheme will be the operator of the SIPP, in their capacity as a ‘bare trustee’.  This means that the operator of your SIPP may be the sole owner of any property held and the operator will need to authorise any development of the property, again before it is started. 

If you owned the property personally before it was sold to your SSAS or SIPP it can be hard to fully relinquish the mind-set that you no longer own it, even though it constitutes an asset of your pension savings. However, it is important you appreciate this point and do not try to proceed with any matters affecting the property without the consent of the other trustees and/or operator.

It is not always obvious whether land or property held within a SSAS or SIPP will be deemed residential by HMRC and it is easy to overlook that ownership of that property does not belong to you personally. There are a number of factors to take into account and a number of ways you can get caught out.

If you are considering a property investment for your pension scheme, talk to your professional trustee or operator, ask for their guidance, explain to them what you want to achieve in your SSAS or SIPP and let them confirm if it can be done tax-efficiently before taking any action. The rules are complex and the tax charges for getting things wrong, even inadvertently, are huge.

You could be putting both your personal assets and your pension savings at risk by not taking advantage of the knowledge and wisdom available to you.

Quote courtesy of Miles Kington, journalist, musician, humourist (1941 – 2008)

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