Why a professional trustee would carefully consider assets offered as security against a company loan

Posted: 04/01/2011 13:36:45 by Global Administrator | with 0 comments
Filed under: pensions, sipp, ssas, denton

SSAS schemes have seen a revival in interest as bank lending has been tightened over the last 18 months. If a company is looking to replace bank borrowing with that from its own pension scheme, the merits are clear to see but only if HMRC regulations are thoroughly considered and met.

All post A-day lending must be secured with a first charge and whilst HMRC do not publish a list of acceptable assets, some, if called upon in the event of security, create their own problems.

Plant and machinery, and stock for example, when called in as security result in the scheme holding taxable moveable property, which creates a tax charge on the scheme members. In a company liquidation, they often also yield significantly under book value and if they fail to cover the loan advance can lead to unauthorised payment taxes effectively on the Trustees.

It is all too easy for Member Trustees to accept such security and the risks associated with them, but they will not necessarily be the scheme's own beneficiaries, all of whose interests it is the Trustees responsiblity to protect.