Corporation Tax Act 2009 section 321A

Restriction on debits resulting from release of loans to participators etc

Section 321A prevents a close company from claiming a loan relationship debit when it releases or writes off a loan that was made to a participator (or their associate) and which gave rise to a tax charge on the company.

• Applies where a close company has made a loan or advance to a participator (or associate) that triggered a tax charge under the close company loans-to-participators rules
• Covers loans to individuals or to companies acting in a fiduciary or representative capacity
• If the loan debt is subsequently released or written off, whether in whole or in part, the company cannot recognise a debit under the loan relationships rules
• The restriction ensures the company does not obtain a tax advantage by writing off a loan that has already attracted a specific tax charge