It’s a simple question on paper: can a Small Self-administered Scheme (SSAS) borrow money? However, the answer is a little more nuanced than you might have expected.
The short answer is yes, a SSAS is able to borrow money, although the money borrowed must be used to benefit the SSAS. Typically, that includes the purchase of commercial property, the funding of loans back to the principal employer or to make another type of investment.
How much can a SSAS borrow?
Trustees can borrow up to a maximum of 50% of the net asset value of the SSAS. This is the total asset value less any existing borrowing. For example, if the SSAS has assets worth £600,000 and £100,000 has already been borrowed, then any further borrowing would be limited to £200,000, and total borrowing would be £300,000 (i.e. 50% of the value of the assets held by the SSAS).
Trustees can use 100% of the scheme’s assets plus any loans for asset purchase. This means that trustees have access to funds of 150% of the value of the scheme.
Where can a SSAS borrow from?
Trustees may choose to loan money from an individual, a company or a financial institution such as a bank. If the loan is secured from a connected individual, then it must be assured that the loan is made on a commercial basis.
Want some more advice?
A little expert guidance can help you make the best decisions for your SSAS. Here at Prydis we have a unique blend of skills across commercial tax, wealth management and accountancy – and can give you the advice you need to make your decisions with confidence. Get in touch for a free consultation.