Income Tax (Trading and Other Income) Act 2005 section 421

Income tax treated as paid

Section 421 explains how a person's income tax liability is treated as satisfied when a loan from a close company is released or written off, and the limits on the tax credit that arises.

• When a loan is released or written off, the borrower is treated as having paid income tax at the dividend ordinary rate on the gross amount released or written off
• The tax treated as paid under this section is not repayable, even if the person is a non-taxpayer
• The tax credit cannot exceed the amount of income tax that would be due on the loan amount actually charged to tax
• Personal representatives administering a deceased person's estate are not charged under this chapter and therefore do not receive a tax credit under this section — the income instead forms part of the aggregate income of the estate