How to buy Commercial Property using your Pension Fund

Investing in business has become a necessity for some people as the world once again nudges towards recession, but funding commercial enterprises when credit options have been exhausted and savings depleted can prove extremely difficult. Challenging economic conditions have prompted some business-minded individuals to seek alternative sources of funding. In some cases, pension funds have been used to buy commercial property.

In the UK, Investment Regulated Pension Schemes (IRPS) were introduced from April 2006 with one of its aims being to simplify the process of purchasing property at home or abroad using funds from a pension. Regulated by the HM Revenue & Customs (HMRC), IRPS combines previous provisions of the law to create a system that provides investors with an opportunity to claim tax relief on property investments. Not all property investments attract tax relief and not all types of property can be purchased using funds from a pension.

Residential elements of commercial property that are occupied by any person connected with the pension scheme are not, for instance, permitted by the HMRC, so funds cannot be drawn from a pension scheme to pay for, say, a flat above a shop that will be occupied by a member of the scheme. Types of commercial property investment that will incur tax include time shares, beach huts, residential property, hotel room leases, conversions and shops with upper flats (although not in all cases).

In short, funds can be drawn from a pension scheme to pay for commercial property. Not all types of property are permitted and some are subject to tax, but the process itself is becoming increasingly popular in today’s turbulent economy.

Please Note: The information contained within this article does not constitute financial advice.