Income Tax (Trading and Other Income) Act 2005 section 420

Loans and advances to trustees of settlements that have ended

Section 420 deals with the tax consequences when a company writes off or releases a loan originally made to trustees of a settlement, after that settlement has come to an end.

• Applies where a company made a loan or advance to trustees of a settlement and was chargeable to tax under section 455 of the Corporation Tax Act 2010 in respect of that loan
• The section is triggered when the settlement has ended and the company subsequently releases or writes off all or part of the outstanding debt
• An income tax charge arises on the person who owes the debt at the time it is released or written off
• The charge falls under the settlements income provisions, ensuring the forgiven debt does not escape taxation simply because the trust has ceased to exist