Buying business premises through an SPV, LLP or SSAS pension

This guide is for company directors, practice partners and business owners who are about to buy premises and are being asked a question that comes before the mortgage: who should own the building? It explains how each common structure works and how lenders approach it. It does not give pension, tax or legal advice, and the right answer depends on your circumstances, so the choice should be made with a regulated pension adviser, your accountant and a solicitor. Smart Funding Solutions is a broker that arranges the borrowing once the structure is settled, through lenders on our panel of 300+, for facilities from around £10,000 to £500,000+, with larger facilities available in suitable cases. Our commercial property finance hub covers the funding routes themselves.

01The four main ownership routes

Lenders are comfortable with each of these when the structure is set out clearly. What changes is who signs, what the lender checks and how long the process takes.

02Buying in the trading company

The simplest route. The company buys the building, the lender underwrites the company's trading as it would for any commercial mortgage, and there is one set of accounts and one borrower. The drawbacks show later. The building sits on the same balance sheet as the trading risk, so if the business fails, creditors can look to it. And if the owners later sell the business but want to keep the property, extracting it from the company can involve tax and costs that would have been avoided by holding it separately from the start.

03Using a separate property company

A special purpose vehicle, or SPV, is a limited company set up only to own the property. It is usually owned by the same shareholders as the trading company, or sits alongside it under a holding company. The SPV buys the building and grants the trading company a formal lease at a market rent.

How lenders view it. The SPV has no trading history, so the lender looks through it to the business paying the rent. It will want the lease, the trading company's accounts and, in most cases, personal guarantees from the directors and a guarantee from the trading company. In effect it underwrites the trading business, but takes security over a property held in a separate entity.

Why owners choose it. The property is separated from day-to-day trading risk, and the business and the building can be sold independently: a buyer of the business can become a tenant, while the owners keep the property as an investment. The rent paid by the trading company is generally a business expense.

What it costs. Two sets of accounts, a lease that must be on commercial terms, corporation tax on the SPV's rental profit, and a further tax step whenever profits are taken out by shareholders. How the deposit reaches the SPV, whether by shareholder loan, a loan from the trading company or new share capital, has its own tax consequences. Stamp Duty Land Tax is payable on the purchase in the usual way.

04Partners, LLPs and professional practices

Professional firms often hold premises outside the practice itself. In a GP, dental, veterinary or law partnership, the building may be owned by some partners and not others, or by a separate property LLP whose members overlap with the practice. That lets property ownership be bought and sold separately from a share of the practice, which matters when partners retire or new partners join. The practice pays rent to the property owners.

Lenders read both the partnership agreement and any property-owning agreement, because they need to know what happens if a property-owning partner leaves, dies or wants to sell. A clear mechanism for buying out a departing partner's share is often a condition of lending. For NHS general practice in England, the rent or borrowing costs on surgery premises may be reimbursed under the NHS premises costs directions, and lenders that know the sector take that into account. Sector detail is on our pages for GP surgery premises, dental practice premises and solicitor office purchase.

A special purpose vehicle, or SPV, is a limited company set up only to own the property.

05Buying through a SSAS or SIPP

A small self-administered scheme (SSAS) is an occupational pension scheme set up by a company, usually for its directors and key staff, who are often its trustees. A self-invested personal pension (SIPP) is a personal pension run by a provider that allows a wider range of investments. Both can buy commercial property, and owner-managed businesses often use them to buy the premises the business trades from. The rules below are set out in HMRC's guidance on tax on investments for pension trustees.

How the purchase works

1. The scheme, acting through its trustees, buys the property as a scheme investment, using funds already in the pension, new contributions and, if needed, borrowing.
2. The scheme leases the building to the business on commercial terms, at a market rent supported by an independent valuation.
3. The business pays rent into the pension, where it is held inside the tax-advantaged scheme rather than paid to the owners personally.
4. When the property is eventually sold, the proceeds stay in the pension.

Borrowing limits

A registered pension scheme can borrow up to 50% of the net value of its assets, measured immediately before the loan. Borrowing above that limit triggers tax charges. Pension schemes generally cannot hold residential property without tax charges, so the building must be genuinely commercial.

Illustration only, with round hypothetical figures. A SSAS with £300,000 of net assets could borrow up to £150,000, giving it up to £450,000 to spend before costs. If the target building costs £420,000 plus SDLT, legal and valuation fees, the scheme can probably fund it without any further contribution, although it would then hold most of its value in one property.

Points that are specific to pension property

• Connected parties. The scheme can buy a building from a member or their company, or lease to the sponsoring business, but only at market value and on commercial terms. Below-market rents or prices can create unauthorised payments.
• Loans to the business. A SSAS can, within strict conditions, lend to its sponsoring employer, secured and repaid over no more than five years. A SIPP cannot lend to a connected business.
• Joint purchases. A pension can buy a share of a building alongside the company, members' other schemes or unconnected investors, which helps when one scheme cannot fund the whole price.
• VAT. If the building is opted to tax, the scheme may need to register for VAT and charge it on the rent.
• Liquidity. A pension that owns a single building may struggle to pay benefits or transfer out without selling it. If the business moves out or fails, the scheme still holds the property and any loan.
• Inheritance tax. The government has confirmed that most unused pension funds and death benefits will come into the scope of inheritance tax from 6 April 2027, as set out in its policy paper on unused pension funds. That changes one of the long-standing reasons for holding property in a pension, and is a point to review with your advisers.

06How lenders assess pension borrowing

Fewer lenders will lend to pension schemes than to companies, and the process has more parties. Expect them to look at:

• Who borrows: the scheme trustees, or the SIPP provider's trustee company, so the provider or scheme administrator must approve the loan documents and the lease.
• The rent: what the tenant business will pay, supported by an independent valuation, much as a lender would test an investment mortgage.
• The tenant's accounts: the trading business pays the rent that services the loan, so its profits and other debts are read closely.
• The lease: its length and whether it is on commercial terms that would stand up if the business were sold.
• The 50% limit: the loan must stay within the scheme's borrowing limit, measured on its net assets before the loan.

Timetables are longer than for a company purchase, so build in time for the administrator, the independent valuation and the lease to be agreed.

07Questions to take to your advisers

• Do we expect to sell the business while keeping the building, or sell both together?
• Who should benefit from the property's rent and growth: the company, the shareholders personally, or our pensions?
• How will a departing partner or shareholder be bought out of the property?
• Can our pensions afford to hold one illiquid asset, and what happens if the business stops paying rent?
• How do the inheritance tax changes from April 2027 affect a pension purchase for us?
• What are the SDLT, VAT and capital gains consequences of each route, including any future transfer?
• Which route is simplest for the lender, and does that affect the terms available?

Pension advice is regulated, and MoneyHelper explains how to choose a financial adviser. Your accountant should model the tax position of each route before anything is signed.

08Documents for a pension or SPV purchase

09Arranging the finance

Once your advisers have settled the structure, we approach lenders on our panel that lend to it, whether a trading company, an SPV, a partnership or LLP, or pension trustees, and compare terms with you. The lender makes the decision. For the wider steps of a purchase, see buying business premises, and if you already own the building and want to change its loan, commercial property refinance. It is free to enquire; any broker fee is disclosed separately before you proceed.