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Experts warn against short-term SSAS loans

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A short-term loan offering launched for SSAS loan-back customers is “extremely expensive”, experts warn.

Last week asset-based lender HNW Lending, which provides loans of up to £1m against assets such as classic cars, entered the SSAS market.

The lender says transferring to a SSAS and obtaining a loan-back
arrangement can take three to six months.

It is offering loans to cover this period for those who want the money immediately.

The loan incurs interest of 1-1.25 per cent per month and is repaid once the loan-back has been rel-eased. It is secured by a debenture against the company’s assets.

Dentons director of technical services Martin Tilley says: “This seems extremely expensive. HM Revenue & Customs rules require the main purpose of a SSAS scheme to be to provide retirement benefits, but this suggests the main purpose is to lend funds to a business unable to secure credit elsewhere.”

Talbot and Muir head of pension technical Claire Trott says: “Loan- backs can fall through, so customers need to make sure they have an alternative way out. If customers are desperate for the money, then this might not be the right thing for them. It would be a concern if they were using the loan to prop up a struggling company.”

HNW Lending founder and director Ben Shaw says: “Several months is a long time to wait if you want the money to develop your business. Loan-backs are usually successful but there needs to be an exit strategy.”

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  1. Securing a Loanback from a SSAS against the company as a whole through a Debenture, is something that I would always warn against. Simply due to the fact that the day to day trading activities of the Employer will have a direct effect on the value of the business (i.e. the asset/s used as security). http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm07103070.htm or http://www.hmrc.gov.uk/manuals/ptmanual/ptm123200.htm#IDAVXUAE clearly state that “Where a sponsoring employer, or person connected with the sponsoring employer undertakes a transaction which reduces the value of the security, an unauthorised payments occurs, being equal to the amount of reduction in the charge.”

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