Purpose

Both SSAS and SIPP Trustees can borrow within specific limits for:

• Acquiring an interest in a commercial property,
• Development of such a property,
• Payment of any VAT liability arising from the purchase or development of commercial property.
• Stamp duty, legal and other expenses of the purchase or development.
• Trustees can also borrow for other purposes.

Borrowing Limits

The limit is 50% of the net pension fund value at the time the borrowing is drawn down .

It should be noted that if a loan is drawn down in stages the Revenue require each amount drawn to be tested against the limit at the date of draw-down. Therefore, particular care needs to be taken when borrowing to acquire property or land with a view to development over a period of time and/or in stages, particularly if borrowing to the maximum and the value of the scheme's assets is likely to fluctuate.

Both SSAS and SIPP Trustees must allow for stamp duty and VAT when calculating the loan required, they cannot borrow an additional sum over the basic limit to fund these items.

Lender's Requirements

Apart from the requirements of the Inland Revenue, the lender will have its own requirements. For example, lenders often require the anticipated rent from letting the property to cover the loan repayments by a predetermined margin. Some lenders will take into account other income e.g. contributions, investment income, when assessing the ability to meet loan repayments.

Further Guidance

This is a summary of the relevant Inland Revenue regulations. For more detailed guidance please Contact us.

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