SSAS - Investment & Loans
SSASs now rank for the normal limits on employer related investments. This means that a SSAS cannot invest more than 5% of the fund value in the shares of the sponsoring employer. There are now no limits on concentration of investments for registered pension schemes, such as SSASs. This means that a SSAS, like any other registered pension scheme, could hold 100% of the issued share capital of another company, provided it was not those of the sponsoring employer.
The trustees of a SSAS can purchase up to 30% of the shares in an unlisted company. They are not permitted to purchase shares from the members or persons associated with them.
The above limits do not apply to a scheme that is not an occupational pension scheme (such as a SIPP).
SSASs historically have been barred from making investments in personal chattels, and unless certain conditions are met, residential property.
- Can a SSAS invest in a commercial property and rent/lease it to the sponsoring employer?
Yes. However the sponsoring employer must pay a commercial rent on the property and in fact all transactions involved must be at ‘arms length’ and on a commercial basis. Failure to pay the commercial rent would lead to an unauthorised payments charge on the employer of an amount equal to the shortfall. The scheme administrator should obtain a professional independent valuation for all leases between the scheme and any connected parties.
- Can a SSAS invest in residential property?
Prior to 6 April 2006 (A Day) a SSAS could invest in and hold residential property under certain restrictive conditions. The tax advantages of investing in residential property have now been removed, as from 6 April 2006, although it is still permissible to make such an investment. However the new regime is designed to recoup all tax relief given on the amounts used to buy the property. There appears now therefore little point in purchasing residential property under a SSAS.
Residential property purchased prior to 6 April 2006 is protected from these new regulations provided they are not enhanced or improved.
- Can a SSAS borrow from the sponsoring employer, scheme member or any other source?
A registered pension scheme, including a SSAS, can borrow from any source. However if the scheme borrows from a member or a person or business connected to the member this must be done at a commercial rate otherwise it will be subject to a tax charge.
- Can a SSAS lend to either a member or to the sponsoring company?
A SSAS cannot lend to a member of the scheme.
A loan to the sponsoring company can be made under certain conditions, provided it is done on a commercial basis.
Q & As
