The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
This guidance note deals with the rules regarding payment of tax, and making claims for repayment of tax on loans to participators. For information on the definition of close companies and other relevant definitions, please see the Definition of a close company guidance note.
For a summary of other tax implications of close company status, see the Close companies ― overview guidance note.
For loans or advances made by a close company, a tax charge of 32.5% will apply if the loan was made otherwise than in the ordinary course of a business carried on by it, which includes the lending of money to any of the following:
a person who is a ‘participator’ in the company or is an ‘associate’ of a participator
a trust in which a participator or their associate is trustee or potential beneficiary, or
an LLP or other partnership whose membership includes a participator or their associate ― this will catch, for instance, genuine commercial structures such as loans from related close companies to property development LLPs to fund new developments
The company must pay tax at 32.5% on the amount of the loan or advance that is outstanding nine months after the accounting period end in which itwas made. This rate aims to prevent an unfair tax advantage from being obtained from the difference between the rate of tax on loans and benefits, etc to participators, and the rate of tax on dividends.
The tax is due from the company as if itwere corporation tax chargeable for the accounting period in which the loan, etc was made and is therefore due at the same time as the corporation tax is due.
See Example 1.
Anti-avoidance legislation applies to prevent abuse of the rules. For example, structures involving a loan or advance made via an intermediary are also included.
See also Simon’s Taxes D3.401C.
The following are included in
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
‘Hold-over’ relief allows for the deferral of a gain that would otherwise arise in relation to a disposal. No capital gains tax (CGT) is due in respect of the disposal, but the base cost of the asset for the transferee for the purpose of a future disposal is reduced by an amount equal to the gain
IntroductionSubsistence is the amount incurred as a consequence of business travel. Typically it relates to accommodation and meal costs incurred. These amounts are allowed because they are associated with the necessary travel. See the Travel expenses guidance note for more information of when
IntroductionUK tax must be withheld on UK payments including:•interest•royalties•rental incomeWithholding tax may be reduced under double tax treaties (DTT) or European directives, both of which may be subject to making a formal claim.This guidance note outlines the rules for UK withholding tax, and
This guidance note considers the capital gains tax implications where shares are sold in exchange for new shares.The consideration paid by a purchasing company to the shareholder(s) for their shares in a target company could be in the form of either:•new shares in the vendor in exchange for shares
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.