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SSAS loans.


A SSAS can make loans to unconnected UK limited trading companies and to a sponsoring employer. In both cases certain criteria must be met which is outlined below.

Loans to unconnected UK limited trading companies must be agreed between the trustees and the borrower and are allowed up to a maximum of 95% of the net asset value of the SSAS, provided it is secured by a first charge on property (with a maximum loan to value of 60-70%).

For any other SSAS loans we will allow up to a maximum of 50% of the net market value of the SSAS at the point of advance. Such other loans and shares in unquoted UK companies, must not exceed 50% of the SSAS fund. 

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 the sponsoring employer but do not participate in the SSAS) are not permitted.

Loans to a sponsoring employer

Please see our case study - Making a SSAS loanback to a sponsoring employer

Loans to a sponsoring employer can be made only if the following conditions are met:

Maximum amount

The amount of the loan, together with outstanding amounts of any existing loans to sponsoring employers, must not exceed 50% of the net market value of the SSAS fund at the time the loan is made.

Repayments

Loans must be repaid in equal instalments, either monthly or quarterly, of capital and interest for each complete year of the loan. An imcomplete year at the end of the term is treated as the final complete year.

Loan term

The maximum term is 5 years from the date the loan was advanced. The total amount owing, including interest, must be repaid by the loan repayment date.

Interest rates

The minimum interest rate a SSAS may charge is calculated at 1% above the average of the base lending rates of 6 leading high street banks. Higher rates may be charged but only if the terms applied mirror a commercial loan offer and can be evidenced. We will require the interest rate to be fixed at outset.

Security

The loan must be secured by a first charge on a suitable asset of at least the equivalent value to the loan plus interest. The asset charged need not be owned by the borrower.

This is the most difficult of all of the conditions to achieve.

Although HMRC will permit any asset to be used as security, certain assets will create tax problems and liabilities in the event of default. For example, plant and machinery often realise significantly less than book value in the event of a company failing. In addition, the act of seizing any such ‘tangible moveable property’ by the Trustees on default by the sponsoring employer immediately gives rise to tax charges on the members and the SSAS. This would also apply if the security was residential property because tangible moveable property and residential property are treated by HMRC as 'taxable property'.

With regard to the above, we will normally only accept commercial property as security however we may accept residential property where the charge is over proceeds of sale, rather than the property itself. Where residential property is being considered as security for the loan and is used as a main residence, it will be subject to individual approval by Dentons.

Please note: the loan can only be used to acquire taxable property provided that 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. If the loan is used by the borrower, the property must not be occupied or used by a member of the SSAS or a connected person.

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.

Please complete the relevant questionnaire for our consideration if you wish to consider a SSAS loans to a sponsoring employer or other SSAS loan.

For more information please contact us.

01483 521521