There is no problem with this apart from the logistical issues of paying for the deposit there and then and completing the purchase in 28 days which can be challenging.
Land
Popular strategies are either purchasing farmland to let to a farmer or purchasing brownfield sites to obtain planning permission and sell-on to a developer with a significant capital gain.
This is a specialist area and some scams were in operation in recent years where land was sold in chunks to pension schemes with the promise of planning gain which had no chance of being obtained.
Sometimes the land may form part of a larger title that includes residential property such as a farmhouse. The investment can be made possible by splitting the title so the pension scheme purchases the land only.
Moorings
We have had a surprising number of enquiries about these recently. Purchase of moorings is allowable and constitutes commercial property. Another unusual option is golf courses, which are also allowable.
Overseas Property
In theory, commercial property anywhere in the world can be purchased by a UK registered pension scheme.
In practice there are many hurdles to overcome, not least that the country of purchase may not recognise the property as being held by a tax-exempt pension scheme and local property taxes might apply making the investment unviable.
Solar Panels and Wind Turbines
This is often debated, so it is probably best to use HMRC’s words. Their Pensions Tax Manual says:
"If an asset has not become part of the land or any building to which it is attached, then it retains its separate identity. If, however, it is permanently or semi-permanently attached to the land or any building to fulfil a function as part of the building, it is regarded as part of that land or building."
HMRC regards the question of mobility as one of fact. Can the asset be moved easily and without damaging its surroundings? Small items of plant or other easily moved items will satisfy the test.
Connected Party Transactions
A UK pension scheme can purchase commercial property from, sell to or let to connected parties. In all cases a valuation from a Rics-qualified valuer is required to demonstrate that the price paid is an open-market arms-length one and no manipulation of prices to benefit one party or the other is taking place.
Borrowing
UK pension schemes can borrow up to 50 per cent of their net fund value to purchase commercial property. Lending can be sourced from commercial lenders or can be from connected parties such as the client’s company.
