Understanding SIPP/ SSAS borrowing rules for property purchases and refinancing 

Self-Invested Personal Pension Schemes (SIPPs) and Small Self‑Administered Schemes (SSASs) remain a popular choice for business owners looking to invest in commercial property through their pension. One area that can cause confusion, however, is how borrowing works, particularly when a SIPP/SSAS wishes to utilise borrowing to purchase a property or refinance an existing loan. 

The rules on borrowing are set by HM Revenue & Customs (HMRC), and in this article we will set these out to help potential investors make SIPP/ SSAS property transactions involving borrowing much smoother and less stressful. 

The core rule: SIPP/ SSAS borrowing is limited to 50% of Net Asset Value 

HMRC allows a SIPP/ SSAS to borrow money, but only up to 50% of the net value of the SIPP/ SSAS before the borrowing takes place. 

This is confirmed in the HMRC Pensions Tax Manual, PTM124000, which states: 

A registered pension scheme may borrow an amount up to 50% of the net value of the fund prior to the borrowing taking place.  

Net value means the total value of all SIPP/SSAS assets before the asset intended to be purchased with the borrowing is acquired. If there is any existing lending to the SIPP/SSAS, this needs to be considered. 

For example: 

• SIPP/SSAS fund value before purchase = £420,000 

• Outstanding existing loan = £20,000 

• Maximum permitted borrowing = £200,000 (50% of (£420,000 – £20,000)) 

Borrowing can be used for any purpose that benefits the Scheme 

HMRC permits borrowing “for any purpose” provided it benefits the SIPP/SSAS. 
Common examples include:  

• purchasing a commercial property 

• refinancing an existing SIPP/SSAS mortgage 

• funding property refurbishments or development 

• raising funds for liquidity within the scheme. 

However, all borrowing must comply with the 50% limit, and the transaction must not give rise to an unauthorised payment. 

Who the SIPP/SSAS can borrow from 

A SIPP/SSAS can borrow from any commercial lender, and HMRC also confirms it may borrow from: 

• the sponsoring employer 

• a member (trustee) 

• or any connected party. 

However, borrowing from members or connected parties must be on entirely commercial terms, otherwise the scheme risks unauthorised payment charges.  

Refinancing: common area of confusion 

It is often assumed that the refinance is based on the value of the property, but HMRC’s rule is based on net SIPP/SSAS fund value prior to borrowing, not property value. 

Example: 

• Cash and shares value = £100,000 

• Property value = £600,000 

• Outstanding loan = £400,000 

• Maximum borrowing allowed = £150,000 (£600,000 + £100,000 – £400,000)/2 

Even if a lender is prepared to lend more based on property value, the SIPP/SSAS cannot exceed the 50% borrowing limit. 

This limitation applies whether refinancing: 

• extends the term 

• switches lenders 

• or increases the debt to release equity. 

Treatment of Value Added Tax (VAT) 

If a property purchase includes VAT, the VAT must be factored into the total borrowing requirement. 

This means VAT cannot be borrowed on top of the 50% limit. 

What happens if the SIPP/SSAS exceeds the 50% limit? 

If borrowing exceeds the permitted threshold, HMRC treats it as an unauthorised scheme chargeable payment, leading to significant tax consequences, including: 

• 40% scheme sanction charge on the amount of excess borrowing 

• additional tax charges on members in some circumstances. 

The scheme administrator (the professional trustee) must report to HMRC details of borrowing that exceeds the 50% limit. 

HMRC explicitly sets this out in PTM124000.  

Security requirements 

There is no requirement that the scheme must offer its assets as security, although this likely to be required by any commercial lender. 

Typically, lenders require: 

• a legal charge over the SIPP/SSAS property, and 

• assignment of rental income 

 
Where security is taken, lenders will likely require due diligence to be carried out, even where an existing property owned by the SIPP/SSAS is being refinanced. The lender’s due diligence requirements should be established as early as possible to avoid delay later on in the transaction, and trustees should ensure that the lender instructions are issued to legal advisors as early as possible in the process so that due diligence work can begin.  

Borrowing for joint purchases 

Where a SIPP/SSAS is purchasing jointly with: 

• another SIPP/SSAS 

• a company 

• an individual 

• or multiple parties, 

the borrowing limit applies only to the SIPP/SSAS’s share of the purchase, not the entire property value. 

Joint purchases can be complex where lenders are involved and where the SIPP/SSAS is a party to a joint purchase and are not a borrowing party, any borrowing arrangements undertaken by the joint purchaser/s should be structured to ensure that the SIPP/SSAS’ beneficial interest in the property is properly ringfenced and doesn’t ‘prop-up’ any external borrowing. 

Why specialist SIPP/SSAS support matters 

On paper, the rules are clear. In practice, SIPP/SSAS property borrowing often involves: 

• multiple parties 

• tight completion deadlines 

• lender requirements that do not align neatly with pension rules. 

Our specialist SIPP/SSAS team regularly advises on: 

• property purchases and joint acquisitions 

• refinancing and restructuring pension borrowing 

• transactions involving connected parties. 

By involving specialist SIPP/SSAS solicitors, trustees can be confident that their transaction is in the hands of legal advisors that understand the additional regulatory requirements that govern SIPP/SSAS borrowing. 

If you would like any assistance with a transaction or have any enquiries relating to property transactions utilising borrowing, please contact Oliver Crichton or Sam Froud.