All Trustees of the Scheme must be involved in every investment decision, including any loan made from the Scheme. When a loan is issued, the lender listed in the Loan Agreement must include the full legal names of each Trustee, acting as Trustees of the Scheme.

What Types of Loans Can a SSAS Make?

Under current HMRC rules, a Small Self-Administered Scheme (SSAS) may only issue loans in two specific scenarios:

1. Loans to Unconnected Third Parties

These are loans made to individuals or companies who have no connected relationship to the Scheme or its Members.

To check whether a person or company is connected, refer to: HMRC guidance here

Examples of connected persons include:

• A Member’s spouse or civil partner
• Relatives of the Member or their partner
• Companies controlled by the Member or connected individuals

Key Rules for Third Party Loans:

• There are no formal HMRC limits on amount or term
• Trustees must act in the best interests of the Scheme and its Members
• To ensure appropriate safeguards, Holtram TLPI only permits these loans if they are:
  • Secured against an asset of equal or greater value than the loan (plus interest), via first legal charge
  • Or personally guaranteed by each Borrower or all Directors/Partners of the Borrower

Please note:
We do not allow loans via peer-to-peer lending platforms, due to the inability to control or verify where repayments are re-invested.

Additionally, where any arrangement is used to redirect funds to a connected party (even if repaid), HMRC may treat this as an unauthorised connected loan, which could trigger significant tax charges or be classed as pension liberation.

2. Loans to the Sponsoring Employer (Also Known as “Loanbacks”)

If you are requesting a loan to a Sponsoring Employer of your SSAS, the loan must meet specific HMRC conditions to qualify as an Authorised Employer Payment.

Refer to: HMRC guidance on employer loans

All the following five criteria must be satisfied:

1. Security Requirement
   The loan must be secured by a first legal charge over an asset of equal or higher value than the total loan (including interest). This asset must be independently valued by a qualified professional (e.g. Chartered Accountant for unlisted shares).
2. Commercial Interest Rate
   The loan must carry at least a 1% margin above the Bank of England base rate. This is the minimum rate HMRC considers to be commercial.
3. Term Limit
   The maximum permitted loan term is 5 years.
4. Loan Amount Limit
   The total value of the loan must not exceed 50% of the net assets of the Scheme, after deducting any other outstanding loans.
   Use this formula:
   Max Loan = (Total Scheme Assets – Liabilities) ÷ 2 – Current Outstanding Loans
5. Repayment Terms
   Loans must be repaid in at least annual instalments, covering both capital and interest.
   Interest-only loans lasting more than 12 months are not allowed.

To ensure compliance, all Holtram TLPI-administered loans use a flat-rate repayment method, which matches how HMRC calculates tax liabilities. This avoids accidental Unauthorised Payments.

Note: Any further advances (top-ups) are treated as a new loan made on the date those additional funds are drawn.

Tax Risks to Be Aware Of

Even where a loan initially complies with all HMRC conditions, the following situations could still result in tax charges being applied to the Scheme, Employer, or Member:

• Underpayments: If less is repaid than expected during any 12-month loan period (“Loan Year”), the shortfall may be taxed as an Unauthorised Employer Payment
• Rollovers: While one term extension is allowed, any amount still outstanding at the end of the original term signals an earlier underpayment—and this can still trigger tax charges
• Use of Funds: If loan funds are used to lend to a Member or someone connected to a Member, HMRC will treat this as an Unauthorised Member Payment, which can be taxed at a high rate
• Security Value Reduction: If the value of the secured asset falls—particularly due to any action by the Borrower or a connected party—the shortfall between remaining loan balance and security value may be deemed an Unauthorised Employer Payment
  • This is especially important when company shares are used as security, since trading performance may affect share value
• Loan Not Fully Repaid After Rollover: If any balance remains unpaid at the end of the extended term, tax will be applied to that amount

Please note: HMRC will never tax more than the original loan amount, but any breach of the above rules carries serious financial consequences