Corporation Tax Act 2010 section 455

Charge to tax in case of loan to participator

Section 455 imposes a tax charge on a close company that makes a loan or advances money to a participator (or an associate of a participator), to certain trusts or partnerships connected with participators.

• When a close company lends money to a participator, an associate of a participator, certain connected trusts, or partnerships that include a participator or associate as a partner, a tax charge arises on the company.
• The company must pay an amount equal to the dividend upper rate (as specified for the relevant tax year) applied to the loan or advance, treated as if it were corporation tax for the accounting period in which the loan was made.
• This tax is due nine months and one day after the end of the accounting period in which the loan or advance was made, and the charge also extends to situations where a person incurs a debt to the company or a third-party debt is assigned to the company.
• If one company controls another, a participator in the controlling company is also treated as a participator in the controlled company; relief may be available if the loan is later repaid or released, and certain exceptions to the charge exist.