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

Temporary non-residents

Section 420A prevents individuals from avoiding tax on loans written off by a company by temporarily becoming non-resident in the UK during the period when the loan is released or written off.

• Where an individual is temporarily non-resident, any loan or advance from a company that is released or written off during the period of non-residence is treated as if it had been released or written off in the period of return to the UK
• The rule applies to all or part of a debt arising from a loan or advance made by a company to the individual
• The rule is triggered where, without this provision, the individual would escape the tax charge on the release or write-off due to non-residence, but would have been liable had the event occurred during the period of return
• The provision also applies where the individual could claim double taxation relief to avoid the liability, even if no such claim has actually been made