Our SSAS schemes can make loans as investments but we will carry out relevant due diligence and restrictions may apply in certain circumstances.
SSAS schemes can make loans to unconnected unquoted UK limited companies but loans to members (or those connected to members) are not permitted other than a loan by a SSAS to a sponsoring employer.
A SSAS can make loans to unconnected UK limited trading companies but certain criteria must be met which is outlined below.
For both secured and unsecured loans, a balance of at least £5,000 in the SSAS default bank account must be maintained after the loan has been made.
Loans to individuals (including members), partnerships or trusts, or companies connected with members (including companies that are associated with a sponsoring employer but do not participate in the SSAS) are not permitted other than a loan to a sponsoring employer.
Please complete and return the relevant questionnaire for our consideration if you wish to consider a:
Since 6 April 2006, a new loan to a sponsoring employer must meet five key tests to qualify as an ‘authorised employer loan’. These are set out in Section 179 of Finance Act 2004. Failure to satisfy any of the conditions for a loan to a sponsoring employer will be an unauthorised employer payment and give rise to tax penalties on the sponsoring employer and the SSAS.
Failure to satisfy any of the first four tests could give rise to an ‘unauthorised payment’ and associated tax charges on both the sponsoring employer and the scheme.
The security requirement can be the most difficult to achieve and the finer points are not always fully appreciated. For example:
The total of these charges could be at least 55% of the amount of the unauthorised payment. It is imperative therefore, that the solicitor drafting the legal charge ensures that in any circumstances, the scheme only ever has an interest in the proceeds of sale of such assets and not the asset itself. In addition, the borrower should pay for all the expenses relating to the loan and legal charge.
If that does happen, the unsecured part of the loan would be an unauthorised payment and could give rise to tax charges on both the sponsoring employer and the scheme.
It should also be noted that where the sponsoring employer is to use an authorised employer loan to acquire taxable property, it would only escape the taxable property tax charges provided the interest the sponsoring employer acquires in the taxable property is for the purposes of its trade or its administration or management, and after the acquisition, the taxable property is not occupied or used by a scheme member or a person connected with a scheme member.
Finally, before agreeing to an authorised employer loan, scheme trustees should ensure that the proposed loan is in the interests of the scheme and its members.
Please note: The loan can only be used to acquire taxable property provided that the taxable property is to be used for the purposes of the sponsoring employer's trade, profession or vocation or for the purposes of the sponsoring employer's administration or management, and is not occupied or used by a member of the SSAS or a connected person.
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