Connected-Party Rules for SIPP Property
Written by Scott Jones, founder of CommercialPropertyKiln · Last updated
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A big attraction of a SIPP is renting the property to your own business. That is allowed, but only on strict arm's length terms, or you risk unauthorised payment charges.
Arm's length is the rule
Where a SIPP deals with a connected party, for example buying from you or letting to your company, everything must be at market value and market rent, exactly as if between unconnected parties. A purchase price or rent set to favour either side is not allowed.
Independent valuation
To fix the market figures, an independent RICS valuation is used for both the purchase price and the rent. This protects the arrangement and gives evidence that it is at arm's length.
Pay the rent
The rent your business owes the pension must actually be paid, on time, at the market level. Rent to the pension is a deductible business expense for your company and is received tax-free by the pension, so paying it properly is both a rule and a benefit. Persistent non-payment or below-market rent risks the arrangement being treated as an unauthorised payment, which carries heavy tax charges.
Keep it clean
Document the lease, use independent valuations, and keep rent payments current and evidenced. This is regulated territory, so take advice. See SIPP commercial property and how to buy through a SIPP.
Can I rent SIPP-held property to my own business?
Yes, but only on strict arm's length terms: market value and market rent, fixed by an independent RICS valuation, with the rent actually paid on time.
What happens if the rent is below market?
Below-market or unpaid rent risks being treated as an unauthorised payment, which carries heavy tax charges.