Acquire assets and borrow money tax efficiently

Borrow money for capital investment from pension schemes


Employers are not generally allowed to borrow from a business' pension scheme. One exception is with small self-administered schemes (SSAS).

SSAS are occupational pension schemes designed for shareholding directors of small limited companies. The schemes are permitted to lend money to the company for any purpose including capital investment, ie for capital assets (tangible property that cannot easily be converted into cash and will be held long-term) or fixed assets.

However, there are restrictions on loans that can be made from the SSAS. Read Pensions Advisory Service guidance on SSAS.

These loans are tax efficient for the pension scheme as the interest income earned is not subject to tax. The company itself can claim tax relief for the interest payable. Its owners are usually the SSAS members so they benefit from its tax-efficient investment - effectively they are borrowing money from and paying interest to themselves.

There are five key tests that a loan must satisfy to qualify as an authorised employer loan, which are:

  • security
  • interest rates
  • term of loan
  • maximum amount of loan
  • repayment terms

The scheme would have to be registered with HM Revenue & Customs (HMRC) and a formal loan agreement should be drawn up.

Read HM Revenue & Customs guidance on pension schemes.