Owner-Managed Businesses

Taxation magazine queries ― loans to participators

Produced by Tolley
  • 26 Apr 2022 19:01

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Taxation magazine queries ― loans to participators
  • Dealing with outstanding director's loan post-death
  • Details of the query as copied from Taxation magazine
  • Link to responses
  • Dividends to clear overdrawn directors’ loan accounts
  • Details of the query as copied from Taxation magazine
  • Link to responses
  • Winding up the company in error
  • Details of the query as copied from Taxation magazine
  • Link to responses
  • More...

Taxation magazine queries ― loans to participators

The following guidance note provides details of queries raised on loans to participators in the last few years in the Readers’ Forum section in Taxation magazine with a link to the full replies. It should be noted that the response to the queries is at a point in time and all relevant legislation should be confirmed as being currently applicable.

Dealing with outstanding director's loan post-death

Details of the query as copied from Taxation magazine

A small trading company loaned one of its elderly director / shareholders £750,000 about five or six years ago and section 455 tax has been paid in full by the company. The other directors / shareholders are close family. It has been suggested that if the loan remains outstanding and is then formally waived after his death, the estate will only suffer basic rate income tax on the distribution with no recourse to beneficiaries. The company's reserves are sufficient to absorb the write off. It is likely that the director will die with minimal assets and the only outstanding liability being this debt owed to the company. It is assumed that his shares will either pass to the children before he dies or would not be worth much in any case. It is more than likely that it will be a technically insolvent estate but the family will not chase the debt. What do readers think about the taxation aspects of the proposal?

Link to responses

See ‘Director's loan’ in Taxation, 24 February

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