The member trustees may use their SSAS‘s funds to inject cash into their business. This is done by making a secured loan to the employer, known as a loanback.
Loans can be used to buy, for example, fixed assets, land for development or to increase stock and have to be repaid by regular capital and interest instalments. Loans are restricted to a maximum of 50% of the net SSAS fund. Such loans must be secured against assets by way of a first charge and the security must be sufficient to cover the loan and interest on it. The maximum term permitted is five years, with the interest being at least 1% above the average base-lending rate of the six leading high street banks.
Rowanmoor’s retained solicitor must be appointed to undertake all legal work for the loan including the security. This is to ensure that the trustees are not exposed to unacceptable risk, which can occur in the case of default on loan payments, if security is not put in place correctly.
Secured loans may also be made to third parties but it is not possible to make loans to the member trustees, or anyone connected to them. This means that a SSAS established by a self-employed business owner or partnership may not lend money back to their business. Loans to third parties are not restricted to 50% of the fund.
The terms and conditions of any loan must be authorised by Rowanmoor Trustees Limited and all member trustees, who must be able to demonstrate that it is a prudent investment decision if questioned by HMRC.
This information relates to the Rowanmoor SSAS. If you would like to know more details regarding the information provided on this page please send your questions via the enquiry box on the right hand side or email us. Alternatively please visit our SSAS literature library.