When must Community Investment Tax Relief be withdrawn under section 245 of the Corporation Tax Act 2010?

CITR must be withdrawn when the average daily loan capital outstanding during years three, four or five of the five-year holding period falls below the permitted balance by more than an insignificant amount. The permitted balance declines from 75% in year three to 50% in year four and 25% in year five, calculated against a reference figure derived from a six-month window starting 18 months after the investment date.

What are non-standard repayments under CTA 2010 section 245 and how are they treated?

Non-standard repayments are those made voluntarily by the CDFI or triggered by a breach of a commercially reasonable loan obligation. They are excluded when calculating the average capital balance. This protects investors from losing relief when repayments arise from genuine commercial circumstances outside their control rather than from deliberate early repayment of the loan.

How does the de minimis threshold work for CITR loan repayment shortfalls?

A shortfall between the average capital balance and the permitted balance is disregarded if it is not more than £1,000. Where the shortfall exceeds £1,000, it is still ignored if it is insignificant relative to the average capital balance for the year in question. This prevents minor timing differences or rounding issues from causing disproportionate withdrawal of relief.

How is the permitted balance for each year of the five-year period calculated under section 245?

The permitted balance is based on the average capital balance during a six-month reference window starting 18 months after the investment date. For year three, the permitted balance is 75% of that reference figure; for year four it is 50%; and for year five it is 25%. This declining profile allows progressive repayment of the loan without triggering withdrawal of CITR.

Corporation Tax Act 2010 section 245

Repayment of loan capital during 5 year period

Section 245 sets out when Community Investment Tax Relief (CITR) must be withdrawn because a loan investment has been repaid too quickly during the five-year holding period.

If the average outstanding loan balance in years three, four or five falls significantly below prescribed permitted levels, all CITR attributable to that investment must be withdrawn.
The permitted balance decreases over the five-year period: 75% of a reference balance in year three, 50% in year four and 25% in year five.
"Non-standard repayments" — those made at the CDFI's discretion or triggered by a commercially reasonable breach of the loan agreement — are ignored when calculating the average capital balance.
A shortfall is disregarded if it is not more than £1,000, or, where it exceeds £1,000, is insignificant relative to the average capital balance for the year in question.

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