Case Study: Business Owner Buys Their Office Through a SIPP

James is a 54-year-old director and majority shareholder of a successful IT consultancy based in Bristol. His firm employs 18 people and has occupied the same 3,000 sq ft office unit on a business park since 2014. For over a decade, James had been paying £2,200 per month in rent to a private landlord — money leaving the business with nothing to show for it at the end of the lease term.

James had built up a personal SIPP worth £520,000 over the years, primarily through contributions from his consultancy. He had heard that it was possible to buy commercial property through a pension but assumed the process was either too complex or too restrictive to be worth exploring. A conversation with his accountant changed his thinking.

The office unit James occupied was valued at £390,000. The landlord was open to selling, and had in fact approached James informally in 2023. The timing felt right — but James needed to understand whether his SIPP could realistically fund the acquisition, and what the process would look like in practice.

Disclaimer: This is an illustrative example based on a hypothetical scenario. It does not constitute financial, tax, or legal advice. Always consult a qualified adviser before making pension or property decisions.

After an initial consultation, the approach was straightforward. James's SIPP had sufficient funds to cover a 50% deposit on the property, with the remaining 50% funded through a SIPP commercial mortgage. This is one of the most common structures we arrange — the pension fund acts as the purchaser, takes out a commercial mortgage, and the business pays rent directly to the SIPP.

The key figures at the outset were:

• Property purchase price: £390,000
• SIPP deposit (50%): £195,000
• SIPP mortgage (50%): £195,000
• Estimated rental income to SIPP: £26,400 per year (6.77% gross yield)
• SIPP mortgage repayment (capital + interest): approximately £1,650 per month over 15 years

The rent James's company paid to the SIPP needed to be set at open-market value — an independent surveyor confirmed £2,200 per month was appropriate, giving a gross yield of 6.77% on the £390,000 purchase price. This meant the rental income comfortably exceeded the mortgage repayments, with the surplus accumulating tax-free inside the SIPP.

Crucially, rent paid by James's company to the SIPP is a legitimate business expense — so the company received full corporation tax relief on those payments, at 25% for a company of this size. In effect, the taxman was contributing to the pension fund every time a rental payment was made.

The transaction from initial inquiry to completion took approximately 14 weeks. Here is how it unfolded:

• Week 1–2: We reviewed James's existing SIPP and confirmed it permitted direct commercial property investment. His existing provider did not — so we arranged a SIPP transfer to a specialist SIPP provider that allows geared property purchases. James retained full control throughout.
• Week 3–4: We approached a panel of specialist SIPP lenders and obtained Decisions in Principle. The chosen lender offered a 5-year fixed rate at 5.85% interest-only, with a capital repayment option. James opted for interest-only to maximise cash flow in the early years.
• Week 5–6: The SIPP provider conducted its own due diligence on the property. A commercial surveyor confirmed the market rent and valuation. Solicitors acting for the SIPP reviewed the title and lease.
• Week 7–10: Full mortgage application submitted. The lender carried out their own valuation and reviewed the proposed lease between James's company and the SIPP. Standard commercial enquiries progressed in parallel.
• Week 11–14: Mortgage offer issued, lease exchanged, completion took place. The SIPP formally became the registered owner of the property, with James's consultancy as the tenant on a new 10-year lease at £2,200 per month.

James described the process as "far more straightforward than I expected." The main complexity was the SIPP transfer at the outset — but this was handled by our team working directly with both providers, and James was not required to manage the transfer himself.

The financial case for the transaction was compelling across multiple dimensions. We worked through the numbers carefully before James committed:

• Annual rent paid to SIPP: £26,400
• Corporation tax saved on rent (25%): £6,600 per year
• Annual SIPP mortgage interest (interest-only, 5.85% on £195,000): approximately £11,408
• Net rental surplus in SIPP after interest: approximately £14,992 per year — growing tax-free
• Capital appreciation projection: At a modest 3% annual growth, the property could be worth approximately £525,000 in ten years. That gain accrues entirely within the SIPP, free of CGT.

Over a 10-year horizon, James's SIPP would receive approximately £264,000 in gross rental income, pay approximately £114,000 in mortgage interest, and potentially see the property grow by £135,000 in value. The net benefit — excluding the corporation tax savings — could exceed £285,000 in the SIPP alone. This is on top of the £195,000 the SIPP already held in other investments.

By contrast, had James continued renting from the third-party landlord, he would have paid approximately £264,000 in rent over the same period with no asset retained. The comparison is stark. Instead of paying £264,000 to a stranger, James was paying £264,000 to his own pension fund — while his company still received the same corporation tax deduction on every payment.

You can model similar scenarios using our SIPP Mortgage Calculator and SIPP LTV Calculator.

James's case is a good illustration of several principles that apply broadly to business owners considering SIPP property. The most important lessons from this transaction are:

• Your existing SIPP provider may not support property. Most retail SIPPs do not allow geared commercial property investment. A specialist SIPP with a compatible trustee is usually required. This is straightforward to arrange but must be done before any property transaction begins.
• The rent must be set at market value. HMRC requires that the rent paid by the connected occupant matches what an arm's-length tenant would pay. Undercharging creates a taxable benefit; overcharging creates an unauthorised payment. A surveyor's confirmation is essential and is standard practice.
• Interest-only vs. repayment is a genuine choice. James chose interest-only in the early years to preserve SIPP cash flow for flexibility. Other clients prefer capital repayment from the outset to reduce leverage over time. There is no universally correct answer — it depends on age, retirement timeline, and cash flow needs.
• The SIPP, not James personally, owns the property. This distinction matters enormously. Gains are CGT-free. Rental income is tax-free within the fund. And when James eventually draws his pension, the property can either be retained in the SIPP (with a SSAS or drawdown arrangement) or sold with proceeds distributed.
• A connected party lease requires SIPP trustee approval. Because James's company occupies the property, the lease is a connected party transaction. The SIPP provider must approve the lease terms, and these must be properly documented. Our team managed this process in full.

For more on the structural options available, see our guides on what qualifies as SIPP property and how SIPP mortgages work.

Three years on from completion, James's SIPP is performing as expected. The rental income continues to service the mortgage with a comfortable surplus. The property has been revalued at £415,000 — a modest uplift that sits entirely within the pension fund, free of capital gains tax.

James has since made additional pension contributions to his SIPP, taking advantage of annual allowance capacity now that the mortgage is in place and the fund has a predictable income stream. He is also exploring whether a SSAS structure might be worth considering when he eventually brings his two co-directors into the pension planning conversation — particularly given the loanback facility a SSAS can offer.

When James reaches retirement age, he has several options: sell the property and receive the proceeds as pension income; retain the property and continue drawing rental income through drawdown; or transfer the SIPP to a SSAS if a collective pension vehicle makes sense at that stage. None of these decisions need to be made now — but having the property inside the pension creates options that renting from a third party never would.

If you are in a similar position — owning or directing a business that occupies commercial premises — we would encourage you to speak to our team about whether a SIPP property purchase makes sense for you.