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How to buy a commercial property with a SIPP pension fund

Case Study Example:   Island Catering cooks up a storm with a SIPP

Mr Henry, Mr Watson and Miss Eastham are directors of Island Catering Limited, a local catering firm based in the North of England. They are interested in using their pension funds to buy a commercial property which will house their catering equipment and enable the business to fulfill its growth potential over the coming years. They currently own the company in a 45: 45: 10 ratio, and this how they would also like the property to be owned.

They have found a suitable commercial property, which has recently been valued at £350,000 plus VAT, however with their pension funds they still have a shortfall of £112,500 which they intend to take out a mortgage to cover.

Following the property purchase, the SIPP intends to lease the property back to Island Catering Ltd by way of a five year lease. The independent rental valuation of the property is £38,400 per annum plus VAT. The purchase price is £350,000 + 20% VAT and 3% Stamp Duty.





How will the rent payments calculate for Island Catering Ltd?

Rent is paid by the tenants to a central account. Property bills such as landlord expenses and mortgage fees will also be paid from this account, whilst funds are then transferred to the individual director accounts in line with their property ownership ratio:








Other factors to consider

As with any property purchase, there are other factors to always take into consideration. The calculations above omit additional fees such as legal and surveyor advice needed to purchase a property. In addition, the financial advice needed to take out a mortgage and the corresponding expense occurred through the mortgage repayments will be dependent on interest rates at the time, and the chosen lender. Lastly, the financial advice needed to set up the SIPP and the relevant administration would also incur cost, Taylor Patterson would anticipate the professional fees to range from £5,000– £6,000.

What should I do next?

For further information about how to purchase commercial property in a pension, please refer to our technical guides or contact the team on 01772 555073 or via email


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