SSAS Loanback – the Hidden Secret

(whooshing) (upbeat music) – I’ve talked about SSAS or
Small self-administered schemes, in some of my other videos. A SSAS is a company pension
scheme, and it works really well for controlling directors
and family businesses. So as well as the usual investments including direct holdings
of commercial property, a SSAS, unlike a SIPP
can make a secured loan to the sponsoring employer. So, if you have a SSAS,
it means that your company can borrow up to 50%
of the SSAS fund value, so long as it’s secured against an asset. In return, your company
pays your pension fund loan interest, which reduces
your corporation tax, because it’s treated
as a business expense. The interest accumulates in
your pension fund, tax free. So one of the benefits of
this is that instead of paying the bank interest,
you’re effectively paying yourself and growing
your pension fund tax free. The loan has to be properly
documented of course and to protect the
pension fund’s tax status, it’s important that the loan
back meets five HMRC rules. Which are, one, the loan has
a maximum five year term. Two, capital and interest repayments are paid regularly, at least annually. Three, the maximum loan back
is 50% of the SSAS net assets. Four, the interest rate
must be at least 1% over the base rate. Five, a first charge
security must be in place. So, the one that causes
the most difficulty, is usually the security, because ideally it has to be a commercial
property or land. It also has to have a first charge and can’t sit below other
charges of the same assets. Under certain circumstances,
it might be possible for unencumbered residential property, and very large plant machinery
to be accepted as security. But. This has the potential
to incur tax charges. Now as this is a complex
subject, it’s important to take professional advice
from a SSAS specialist. Which as it happens, is our area! So, there you go. My quick summary of the SSAS loan back, a hidden secret, hope that’s useful. Give this video a thumbs up,
and I’ll see you next time. (upbeat music)

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