This session covers the Section 455 tax rules on overdrawn loans to participators, the connected party late interest rules, the requirement to complete Forms CT61 on interest paid on loans to a company and the employment taxes benefit in kind rules on loans to employees.
Categories:
- Tax
- Webinars
This session covers the Section 455 tax rules on overdrawn loans to participators, the connected party late interest rules, the requirement to complete Forms CT61 on interest paid on loans to a company and the employment taxes benefit in kind rules on loans to employees.
Our tax experts also explore the key issues on the process you need to follow for declaring dividends lawfully as well as the necessary documentation required.
Key themes and topics
- Corporation Tax Section 455 rules
- Connected party loan interest rules
- Form CT61 obligations
- Employment taxes benefit in kind rules on loans to employees
- Declaring dividends lawfully
Questions and answers
1. Would exclusion apply to a capital distribution in an MVL?
The fact that a company has entered Members’ Voluntary Liquidation does not alter the liability for Section 455 on any loans to a participator or an associate of a participator before the liquidation commenced. Once the loan is repaid under the normal rules, the Section 455 repayment would
be claimed by the liquidator as part of the asset recovery process.
It is worth bearing in mind the impact of Section 10 Corporation Tax Act 2009 and Section 12 Corporation Tax Act 2009 on the end of a company’s Corporation Tax accounting period, which in turn has an impact on the timescale for Section 455 tax refunds.
2. It was mentioned under the loans that a proposed dividend can be issued to clear a directors loan, however Chris has said this is against ICAS practicing rules, to declare a dividend PYE once profits are known?
It is perfectly acceptable to declare a dividend after a company’s year end, indeed the year end results would be taken into account when determining whether the company had sufficient distributable reserves to pay the dividend (as the dividend would be unlawful if there was not sufficient distributable reserves). The point being covered in the webinar was that the dividend could not be backdated and the dividend paperwork being prepared retrospectively. So a dividend declared today must not be treated as having being declared on an earlier date.
Please get in touch with the ICAS technical helpdesk should you need any further support on this point.
3. If a director's loan is written-off within the 9 months and 1 day period, is the write-off tax deductible in the company as normal?
Whilst it should receive the repayment of the Section 455 tax on the loan written off, the company would not receive Corporation Tax relief on the write off/release of the loan to a participator or an associate of a participator. This is outlined in more detail at Section 321A Corporation Tax Act 2009.
Who are the speakers?
(Please note that views and opinions expressed by speakers at ICAS webinars are their own and not necessarily reflective of ICAS’ views.)
- Hosted by David Menzies CA, Director of Practice, ICAS
- Chris Campbell BA (Hons) CA CTA ATT, Head of Tax (Tax Practice and Owner Managed Business Taxes), ICAS
- Justine Riccomini MSc FFTA AIPA Chartered MCIPD ChFCIPP, Head of Tax (Employment and Devolved Taxes)
Who’s this for?
- Members interested in tax
- Non-members interested in tax
- ICAS students
- Counts as CPD activity
Depending upon your individual role and training and development needs, watching this webinar can count towards your annual Continuing Professional Development (CPD) requirement.