Case Study: Director Uses SSAS Loanback for New Premises

Three co-directors of a precision engineering firm in the East Midlands — David (58), Karen (52), and Mark (49) — found themselves in a frustrating position in late 2024. Their business had grown significantly, and the 4,500 sq ft workshop they occupied was no longer adequate. They had identified a freehold industrial unit nearby, offered at £320,000, that would give them the capacity to take on larger contracts.

The challenge was funding. The business had strong cash flow but limited balance sheet reserves — most profits had historically been paid as pension contributions into their joint SSAS rather than accumulated as retained earnings. The three directors had built up a SSAS with combined net assets of approximately £680,000. A traditional commercial mortgage was an option, but the directors were reluctant to add another creditor relationship after a difficult refinancing experience several years earlier.

Their accountant suggested they look at the SSAS loanback facility — a mechanism that allows a SSAS to lend money to its sponsoring employer, subject to strict HMRC rules. What followed was one of the most elegant examples of pension planning in practice that we regularly help clients navigate.

Disclaimer: This is an illustrative example based on a hypothetical scenario. It does not constitute financial, tax, or legal advice. Always consult a qualified adviser before making pension or property decisions.

Under HMRC rules, a SSAS can lend up to 50% of its net assets to the sponsoring employer at any one time. With net assets of £680,000, David, Karen, and Mark's SSAS could lend a maximum of £340,000. The property purchase price was £320,000 — well within the loanback limit, meaning the entire acquisition could be funded by the SSAS without any external bank debt.

The loanback rules require the loan to be secured by a first charge over an asset of the employer company, made at a commercial rate of interest, and structured on a capital repayment basis over a maximum of five years. In this case:

• Loan amount: £320,000 (47% of SSAS net assets — within the 50% limit)
• Security: First legal charge over the industrial unit being purchased
• Interest rate: 1% above the Bank of England base rate (6.25% at the time of arrangement)
• Term: 5 years, capital repayment
• Annual repayment (capital + interest): approximately £74,400 per year

The company purchased the property in its own name (not the SSAS) using the loanback funds. This is a key distinction from a direct SIPP or SSAS property purchase — the asset sits on the company balance sheet, not inside the pension. The SSAS holds the first charge as security for the loan. This structure suited the directors because they wanted the property on the company balance sheet for business reasons.

The loanback arrangement involved several parties and required careful sequencing. Here is how the transaction progressed:

• Step 1 — SSAS trustee review: The three directors are also trustees of the SSAS, so all three needed to formally agree to make the loan and sign the requisite documentation. The SSAS professional trustee (a requirement of most well-governed SSAS arrangements) also reviewed and approved the transaction.
• Step 2 — Loan documentation: A formal loan agreement was drafted by solicitors, specifying the loan amount, interest rate, repayment schedule, and security arrangements. This is not optional — HMRC requires a written loan agreement for a SSAS loanback to be valid.
• Step 3 — Property purchase: The company's solicitors handled the property acquisition in the normal way. Simultaneously, the charge in favour of the SSAS was registered at Companies House and with Land Registry. The funds flowed from the SSAS bank account to the company's solicitor on completion day.
• Step 4 — Repayment structure: The company set up a standing order to the SSAS bank account covering the monthly capital and interest repayment of £6,200 per month. This payment is a business expense for the company, attracting corporation tax relief.
• Step 5 — Ongoing compliance: The SSAS administrator monitors the loan each year and confirms its compliance status in the annual SSAS return to HMRC. We provide a compliance review service to flag any issues.

From initial enquiry to completion, the process took ten weeks — faster than a typical SIPP property purchase because the company (not the SSAS) was the property buyer, and there were no external lender valuations or mortgage offers to await.

The financial analysis of the loanback compared favourably to a conventional commercial mortgage in almost every respect:

• Interest paid by company to SSAS (Year 1 estimate): approximately £20,000
• Corporation tax saving on interest (25%): £5,000
• Interest received by SSAS: £20,000 — accumulated tax-free within the pension fund
• Total interest paid over 5-year term: approximately £51,000
• SSAS fund position after full repayment: £680,000 original + £51,000 interest received = £731,000 before any other growth

The company avoided bank arrangement fees (typically £5,000–£15,000 for a commercial mortgage of this size), did not need to provide personal guarantees beyond the property charge, and maintained its existing banking relationships without adding a secured creditor. The total cost of finance was competitive with market rates, but the interest payments went to the directors' own pension fund rather than to a bank.

You can model the impact of a SSAS loanback on your own numbers using our SSAS Loanback Calculator.

After the five-year term, the company owns the property outright with no SSAS loan outstanding. At that point, the directors intend to explore a sale-and-leaseback of the property into the SSAS — effectively transferring the asset from the company balance sheet into the pension, achieving a further layer of tax efficiency. This kind of multi-stage planning is one of the reasons a SSAS remains the preferred vehicle for owner-managed businesses with significant property requirements.

This case study highlights several important principles for any business considering a SSAS loanback:

• The 50% cap is calculated on net assets, not gross assets. If the SSAS holds a mortgaged property, the net asset value (after deducting the outstanding mortgage) is used as the base. Directors sometimes overestimate how much can be lent.
• The interest rate must reflect commercial reality. HMRC does not prescribe a specific rate, but it must be a rate a commercial lender would charge for a comparable secured loan. Too low a rate and the loan risks being treated as an unauthorised payment.
• Maximum 5-year term — no extensions. SSAS loanbacks cannot be rolled over or extended beyond 5 years under current HMRC rules. The full capital must be repaid within the original term. Directors must be confident the business can service the repayments before drawing down.
• Security is non-negotiable. The loan must be secured by a first charge over an asset of the employer company. If the property itself is not available as security (e.g. it is already charged to a bank), other business assets may be used — but HMRC requires genuine, realisable security.
• A professional trustee is strongly recommended. While a SSAS can technically operate with only member trustees, having a professional trustee provides an additional layer of governance and reduces personal liability for directors making significant lending decisions.

For a full explanation of the rules governing this facility, see our guide on SSAS loanback rules and the broader comparison between SSAS and SIPP property.

Eighteen months into the five-year loan term, the business is comfortably servicing the repayments. The larger premises have enabled the firm to win two significant new contracts, and Karen estimates the additional revenue more than offsets the annual loan repayment cost.

The directors are now planning ahead. At the end of the five-year term — when the loanback is fully repaid — the property will be unencumbered on the company balance sheet. At that point, they intend to transfer the property into the SSAS via a sale-and-leaseback transaction. The SSAS will purchase the property at its then-market value, and the company will become a tenant paying rent to its own pension fund — similar to the structure in our first case study above.

This phased approach — loanback first, then property transfer — is a well-established planning strategy for SME directors. It allows the company to retain use of the asset and access to the capital in the short term, while building toward a long-term position where the property sits tax-efficiently inside the pension.

If you run a business through a SSAS or are considering establishing one, we encourage you to speak to our team about how the loanback facility might work in your specific circumstances.