Taxes Management Act 1970 section 109

Corporation tax on close company in connection with loans to participators etc.

Section 109 deals with how the normal corporation tax rules for assessment, collection, interest, penalties and appeals apply to the special tax charges that arise when a close company makes loans to, or confers benefits on, its participators.

• All general corporation tax rules — including assessment, collection, appeals, penalties, interest on unpaid tax and insolvency priority — apply to the section 455 and section 464A charges on loans and benefits to participators.
• Interest on overdue tax runs from nine months after the end of the accounting period in which the loan was made or the benefit was conferred, but stops accruing once the loan is repaid or written off, or once a return payment is made in respect of a benefit.
• The general rule that allows interest adjustments when reliefs are given (section 91) does not apply to repayments or discharges of tax arising from loan repayments or return payments under sections 458 or 464B.
• Any relief from the participator loan or benefit charges does not affect the tax charged by any other assessment — it only affects the assessment to tax under those specific provisions.