Visit our sponsor.
The Small Self Administered Scheme (SSAS) can both make loans and borrow.
The power of the trustees to make loans is very useful to many businesses once the fund has grown to a level at which it can provide a useful source of investment.
The trustees can make loans to limited companies. Including the limited company that has the Small Self Administered Scheme (SSAS). I.e. loans to themselves.
There are conditions and restrictions attached, but in general cash flow money is not allowed, funds for capital investment are.
The loan must be repaid using a prescribed rate of interest, but as the interest payments simply feed straight back into the SSAS as a Corporation Tax deductible expense, this is to stop the trustees being too usurious!
The maximum level of loans is 50% of fund value for a trust with over two years history.
The SSAS can borrow funds when seeking to purchase property. ( Though in practice this feature is not often used for liquidity reasons unless all members are at least 10 , and preferably 15, years away from retirement).
Maximum loan is 45% of fund plus three times annual contribution.
I.e. a small company with a SSAS whose members are in their early 40's seeks to purchase a property. The fund is worth £200,000 with annual contributions at averaging £20,000pa over the past three years. Maximum purchase price £200,000 plus mortgage ( £90,000 plus £60,000 ) i.e. £350,000.