How to Use a SSAS Loanback to Buy Business Premises

One of the most tax-efficient strategies available to UK business owners is to have their SSAS pension scheme purchase the company's trading premises, then lease those premises back to the company at a market rent. The company gets a tax-deductible rent expense, the pension fund receives tax-free rental income, and the capital growth on the property accumulates free of capital gains tax.

But what if the SSAS does not have enough cash to buy the property outright? This is where the loanback becomes valuable. The SSAS can borrow up to 50% of its net assets via a commercial mortgage from a specialist pension lending — and, separately, lend up to 50% of its net assets to the sponsoring employer via a loanback. Together, these two mechanisms can significantly extend the SSAS's purchasing power.

The loanback can serve multiple purposes in a property acquisition: it might provide the company with cash to pay for fit-out costs, to contribute toward the purchase price directly (if the SSAS is co-purchasing with the company), or to replenish working capital that the company has deployed toward the deal.

Step 1 — Assess SSAS assets and loanback capacity. Begin by establishing the current net asset value of the SSAS. This determines the maximum mortgage the scheme can take (50% of NAV) and the maximum loanback it can make (also 50% of NAV). Both limits apply to the scheme's total borrowings and loans, so they interact.

Step 2 — Identify the property and agree purchase price. The SSAS trustees must obtain an independent RICS valuation of the target property. The purchase price must be at market value — the connected-party nature of the transaction (selling to or buying from a connected company) makes independence of valuation critical for HMRC compliance.

Step 3 — Arrange SSAS mortgage finance. If the SSAS needs to borrow to fund part of the purchase, approach specialist SSAS lenders. The mortgage will be in the name of the SSAS trustees, not the company. Lenders will assess the SSAS's assets, the lease covenant, and the property itself. See our guide to SSAS property purchase for full detail.

Step 4 — Structure the loanback (if applicable). If a loanback is needed, the trustees document the loan terms: amount (not exceeding 50% of net assets after accounting for the mortgage), interest rate (commercial rate, at least 1% above major lender average base rates), security (first legal charge on company assets of equal or greater value), and repayment schedule (capital and interest at least annually, maximum five-year term).

Step 5 — Complete the purchase and grant the lease. Solicitors acting for the SSAS trustees complete the property purchase. The trustees then grant a formal lease to the company at a market rent, reviewed at intervals specified in the lease (typically every three to five years). All documentation is retained for HMRC reporting purposes.

The tax treatment of this structure is highly favourable at every stage. The company's rental payments to the SSAS are a fully deductible business expense for corporation tax purposes — reducing the company's taxable profits. Those same rental payments arrive in the SSAS as tax-free income, since pension funds are exempt from income tax on investment income.

The company's interest payments on the loanback are also a deductible expense, and those interest payments flow back into the pension fund tax-free. Meanwhile, any capital appreciation on the property — whether measured over ten years or thirty — is exempt from capital gains tax within the SSAS wrapper.

From the company's perspective, contributing to the SSAS in the first place attracted corporation tax relief on the contributions. So the cycle runs: company makes tax-relieved contributions to SSAS → SSAS buys premises and makes loanback → company pays tax-deductible rent and interest → pension fund grows tax-free. This is one of the most efficient uses of pension legislation available to UK business owners.

The most common mistake is underestimating the governance requirements. Because the SSAS trustees are typically also the company directors, there is an inherent conflict of interest in every connected-party transaction. HMRC expects trustees to act in the interests of the scheme members — not the company — and trustees must document their decision-making process to show they have done so.

Valuations must be independent, market-rents must be genuine, and loanback terms must be demonstrably commercial. Any deviation from these standards risks HMRC treating the transaction as an unauthorised payment, with tax charges that can destroy the very value the structure was designed to create.

We strongly recommend working with a specialist SSAS administrator and a solicitor experienced in pension property transactions. We can connect you with both. Contact our team or use our SSAS Loanback Calculator to begin modelling the numbers for your own scheme.