Commentary

D3.402 Close company loans to participators—meaning of qualifying participator and qualifying loan

Corporate tax
Corporate tax | Commentary

D3.402 Close company loans to participators—meaning of qualifying participator and qualifying loan

Corporate tax | Commentary

D3.402 Close company loans to participators—meaning of qualifying participator and qualifying loan

The provisions addressing the tax implications of loans to participators hinge on two key definitions — namely what is a qualifying participator and what is a qualifying loan. Both these key concepts are discussed below.

Qualifying participators

A qualifying participator is1:

  1.  

    •     an individual or company receiving the loan in a fiduciary or representative capacity who is a participator or an associate of a participator

  2.  

    •     the trustees of a settlement where one or more of the trustees or actual or potential beneficiaries of which is a participator in the company or an associate of such a participator, or

  3.  

    •     LLPs or other partnerships where at least one of the partners is an individual and that individual is a participator in the close company making the loan or an associate of an individual who is a participator in the close company

From these definitions it is clear that loans or advances via intermediaries are specifically within the close company tax charge.

Example

An individual (X) owns 100% of the shares in, so is a participator in, a close company

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