InvestAcc Pension Administration

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Can I hold land in a SIPP or SSAS?

Over the last few years, we have seen a large increase in the number of enquiries about investing in land via a SIPP or SSAS pension scheme.

Whilst these types of investment are generally permitted, there are some specific issues relating to pension schemes which must be considered.

What type of land can be held in a pension scheme?

Land which has been used must have a current (or last) commercial usage such as farmland, a sports ground or car park.

It must have access to a public highway, either directly or over another property, such as via a shared private road. This avoids it being landlocked, making the land potentially worthless to third parties.

Any land which is part of the curtilage of a residential property, such as a garden, cannot be held in a pension scheme without triggering tax penalties.

Where must the land be located?

Although the tax laws do not stipulate where the land is located, we will only consider the acquisition of land which is in the UK.

Does there need to be a tenant?

If the land is not going to be used, then it may be possible to buy it without a tenancy in place. However, most customers will seek a tenant as this produces an income for the pension scheme. We do sometimes see speculative acquisitions of land for ‘hope value’ or with the intention of seeking commercial/residential planning permission, which may not be successful.

Note that if the pension scheme needs to borrow to buy the land, it is unlikely a lender would provide finance without sufficient rental income to service the loan, plus a margin. Remember that the maximum a pension scheme can borrow is 50% of its net asset value.

What about land which is close to or adjoining your own property?

Sometimes we are asked whether we can buy land which is next to the property owned by the customer. In these cases, it is important to note that there must be no opportunity to effectively use this as an extension of their garden. We would always insist that the land has its own boundary / fencing and that there is a tenant paying the market rent. The land must also not have its current or last use as residential, when it is acquired by the pension scheme. This would usually mean that the land has its own title and is not included on a residential property’s title.

If I already own land, can I sell it to my pension scheme?

The tax rules no longer prevent transactions with connected parties. In these cases, the land must be bought at the market value provided by a RICS qualified surveyor. If being leased to a connected tenant, then the market rental value will also apply.

Can I buy farmland which includes a farmer’s house?

This can be permitted, provided the person is living there in connection with the business running the farm, and they cannot be connected to you or the pension scheme, and would vacate should the lease to the farm come to an end.  The farmhouse can only be included in the lease to the business operating the farm, it must not be leased on a residential basis.

Alternatively, if buying a whole farm which includes a house, the vendor may agree for the title to be split to allow the land and commercial buildings to be owned by the pension scheme with the house being bought personally by the customer.

Can I develop the land, to put houses on it?

In some cases, commercial land can jump in value if it gains residential planning permission, although the chance of this happening is often remote, making this a very speculative investment.

Where residential planning consent has been granted, we would not allow any development works to commence. In these cases, the pension scheme would need to sell the undeveloped land to a developer, before any development works commenced.

Can I buy contaminated land?

Land can become contaminated, either due to something which has occurred on the land itself, or as a result of something in the local area. Laws pass the liability for dealing with the costs of putting this right on the tenant, or if there is none, the property owner, with unlimited liability.

We always ask for a surveyor’s valuation report and will consider their comments and advice. We also require searches to be done, including an environmental search. Sometimes these will highlight issues for further investigation, and in some cases, it may not be possible to buy the land.

Examples of this include underground petrol tanks on old fuel courts which have not been properly decommissioned, old mineworks, buried asbestos in fields etc.

Does the land need to be insured?

Although there may be no buildings on the land, it is usually a requirement that the tenant has the applicable insurance. Where there is no tenant, there will need to be public liability insurance, which would be a cost for the pension scheme.

Discussing potential investments

Our commercial property team has a lot of expertise and experience, having been involved in over 3,000 acquisitions of commercial property and land.

We are happy to chat through a potential scenario and can usually give you a quick steer on whether something is likely to be acceptable. Sometimes even a complex scenario can have a simple solution!

Please contact us if you would like to discuss a potential investment.

Note that the information in this article is based on InvestAcc’s understanding of current law and HMRC practice, which is subject to future change.

July 21st, 2022