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It is a HMRC requirement that if a registered pension scheme makes a loan to an employer, then the loan must be secured with a first legal charge against an asset of at least sufficient value to cover both the loan and the interest for the full duration of the loan.
There must be no other charge on the asset, which is being used as security that takes priority over the charge made by the pension scheme.
If the asset used as security is deemed as taxable property should the loan security be called in, by HMRC regulations, then there may be additional tax charges under the taxable property regulations.
If an investment regulated pension scheme directly or indirectly acquires taxable property (examples include residential property or tangible moveable property such as art, antiques, classic cars) this will create an unauthorised payment tax charge on the member whose pension arrangement acquires the asset. In addition the scheme administrator will be liable to a scheme sanction charge both on income from the taxable assets and capital gains on their disposal.