Key Takeaways
- From 6th April 2027, most unused pension funds and death benefits will count towards a person’s estate for inheritance tax. This includes commercial property held in a SIPP or SSAS.
- Personal representatives will be liable for reporting and paying the tax, and pension property won’t qualify for business or agricultural property relief.
- Property is illiquid, so a tax bill due within months of a death could force a quick sale or a rushed decision about a family business’s premises.
- Getting the lease right now protects the pension, the business and the family, whatever you decide about keeping the property.
For years, holding your business premises in a SIPP or SSAS looked like one of the smartest moves a business owner could make. The rent went into your pension, the business got a tax deduction and the property sat outside your estate.
From April 2027, that last part changes. Some owners are now asking what would happen to the premises, and to the business trading from them, if they died after that date. And when they look closely at the arrangement, many find the lease itself isn’t in the shape it should be.
This checklist covers the property and lease points worth reviewing now, alongside the questions to take to a regulated financial or tax adviser. Pension and tax planning is regulated advice, so our focus here is the property side. If you’d like your lease and property position reviewed, Osbourne Pinner offers a free 30-minute consultation with our commercial property solicitors.
What changes in April 2027?
According to the government’s policy paper, most unused pension funds and pension death benefits will be brought into the value of a person’s estate for inheritance tax from 6th April 2027. The change applies to deaths on or after that date and was given legal effect by the Finance Act 2026.
Personal representatives will be responsible for reporting and paying any tax due. If they expect tax to be payable, they can direct the scheme administrator to withhold half of the taxable benefits for up to 15 months and pay the tax to HMRC before releasing the rest. That said, benefits passing to a surviving spouse or civil partner remain exempt, and death in service benefits are excluded.
One detail matters particularly for business owners. Pension property won’t qualify for business property relief or agricultural property relief, even where the same asset might have qualified if held outside the pension.
Why is commercial property a particular problem?
Because it can’t be turned into cash quickly. Inheritance tax is normally due by the end of the sixth month after the date of death, and HMRC’s technical note on the changes confirms the same timetable applies to pension property, with interest accruing after that. Selling a commercial building can take far longer.
If the tenant is the family’s own company, a forced sale could also mean new owners for the business’s premises at a difficult time. And depending on the age at death, beneficiaries may also face income tax on money they later draw from the pension. That’s why the property and the lease need to be in good order well before any decision has to be made.
The April 2027 checklist
Work through these points with your pension provider, your advisers and your solicitor.
1. Make sure there’s a proper written lease
Check that a lease exists, that it was granted by the pension trustees and that it’s signed and current. If the term has expired and the business is simply staying on, the position needs formalising. A buyer, a valuer or HMRC will all expect clear paperwork.
2. Check the rent reflects market value
If the tenant is connected to the pension member, the arrangement needs to be on genuine commercial terms. A rent set years ago and never reviewed, or one pitched below market value, can create tax problems for the scheme. Get an independent view of market rent and make sure rent reviews are carried out when the lease says they should be. If a review is contested, our rent review disputes team can help.
3. Confirm the rent is actually being paid
Informal rent holidays and unpaid rent are common where the landlord is effectively the business owner’s own pension. They can also cause tax issues. So, check the payment record and deal with any arrears properly.
4. Check repair, insurance and compliance obligations
Make sure the lease is clear about who repairs and insures the building, and that those obligations are being met. Commercial landlords also have to meet minimum energy efficiency standards for let property, and safety duties such as fire risk assessments still apply between connected parties. Needless to say, problems here can reduce the property’s value or complicate a sale.
5. Understand the tenant’s security of tenure
Find out whether the lease is protected under the Landlord and Tenant Act 1954 or contracted out. That affects whether the business has a right to a new lease and whether the property could be sold with vacant possession. It can cut both ways, protecting the business’s premises on one hand and limiting flexibility on the other.
6. Get an up-to-date valuation
A current professional valuation, ideally from a RICS-registered valuer, helps with tax planning and any decision to sell. It also shows whether the rent is in line with the market and, eventually, makes the estate’s reporting to HMRC easier..
7. Check the title and ownership records
Confirm the property is registered correctly in the names of the scheme’s trustees and that you know who the scheme administrator is. In an SSAS with several members, check what the scheme documents say about each member’s interest.
8. Think through the options, with regulated advice
The options might include keeping the property, selling it on the open market, or restructuring how the business occupies it. However, transactions between the scheme and connected parties must be at market value and follow the scheme and tax rules. These are decisions for a regulated financial adviser and tax adviser, but the lease and property issues above need to be resolved for any option to work.
9. Make sure your family and executors understand the arrangement
Your personal representatives will be responsible for reporting and paying the tax. Make sure they know the property is in the pension, where the lease and scheme documents are kept and who to contact. And last but not least, check that your pension nominations are up to date.
What if there’s a problem with the tenant company?
Even when the tenant is your own business, the pension trustees need to act as a proper landlord. If the business falls behind on rent, fails to repair or wants to leave early, the trustees need to deal with it on commercial terms. Disagreements can also arise between members of an SSAS, or between family members after a death. Our overview of commercial property disputes explains the common flashpoints, and our guide to ending a commercial lease early covers break clauses and surrenders.
Get your pension property and lease reviewed
With April 2027 approaching, an informal or out-of-date lease can undermine tax planning, complicate a sale and leave your family with a difficult decision at the worst time. Putting the property side in order now gives you and your advisers the most options.
At Osbourne Pinner, our commercial property solicitors advise pension trustees and business owners on leases, rent reviews, arrears and disputes involving commercial property. We can work alongside your financial and tax advisers and will give you a clear view of costs before you commit to anything.
Please note that this article is for informational purposes only and does not constitute legal advice. We always recommend speaking to a qualified solicitor for advice tailored to your specific circumstances.
We offer a free 30-minute consultation to discuss your situation, Monday to Friday. You can speak with us via video call or visit our offices in Piccadilly Circus, Canary Wharf, Wimbledon, Harrow or Manchester. To arrange your consultation, call 0203 983 5080, email [email protected] or complete the form below. We do not offer Legal Aid.
