I5.1138 Loans as capital sums

IHT, trusts and estates

I5.1138 Loans as capital sums

I5.1138 Loans as capital sums

A loan and a repayment of a loan are payments of a capital sum1.

Where a loan to a settlor has given rise to liability under these provisions and the loan is subsequently repaid in full, no charge (in respect of any part of the loan which has not been matched with undistributed income) can arise in a tax year following that in which the loan is repaid2. This does not apply if only part of the loan is repaid, and repayment of the loan does not give rise to repayment of tax paid in respect of the loan.

Example 1

Arthur obtains a loan of £25,000 from his settlement on 1 March 2018. The available undistributed income at 5 April 2018 is £10,000 and at 5 April 2019 is £15,000. He repays the loan in full on 30 April 2018. His liability under ITTOIA 2005, s 633 is as follows:

2017/18Amount of loan25,000
Available income10,000
Balance carried

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