(This archived guidance relates to HMRC discretionary
practice before the 6th April 2006. For current guidance on
Registered Pension Schemes see the Registered Pension Schemes
Manual)
Loans of this kind are notified to us using a Documentation
Certificate, PS8. The certificate is in lieu of the loan agreement
and confirms that the scheme rules contain the necessary enabling
provision for the loan to be made. The certificate from the scheme
administrator or Life Office certifies that the loan and/or the
scheme documentation meet the following conditions:
a. the member (who must be a Controlling Director) agrees to
the policy (or part thereof) being used as security for the loan;
b. the loan is within the overall limitation imposed on
employer loans (the 25%/50% test);
c. the loan is for genuine commercial purposes;
d. the rate of interest payable on the loan is CBBR + 3%
(unless a lower rate is supported by written evidence);
e. the loan will be repaid at or before a specified date no
later than 12 months prior to the member's NRD under the rules;
f. the loan will be immediately repaid in certain other
specified circumstances which are set out in paragraph 1d of the
certificate (SF8), and
g. the loan will be recovered in the event of default by the
borrower.
