My client, X Ltd has invested in 30% Ord Share capital of Y Ltd. However X Ltd has also made interest free loans (£50K) to two directors (D & E) of Y Ltd. (D & E each own 30% of Y Ltd). Does anyone know (i) if there is a S455 (s419!) issue for my client X Ltd? and (ii) is there any taxable benefit accruing to D & E for their interest free loan from X Ltd? Neither D or E are connected to my client X Ltd with any family connection. No directors of X Ltd act as directors of Y Ltd. Any help would be really appreciated as I seem to be going round in circles!
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No s.455, but a BIK
As D & E are not shareholders in X Ltd or apparently related to anyone who is, there can be no s.455 position for X Ltd.
However, D & E have a taxable BIK because they have been given a (very) cheap loan as a result of their employment by Y Ltd, but it is X Ltd which must declare the BIK on P11Ds.
Loan interest exception
Where loan interest payable would have qualified in full for tax relief there is no taxable benefit for your directors.
Subscribing for shares in a qualifying company would fit this definition - you need to see if the company qualifys
-- Marion