LOANS TO PARTICIPATORS - Conundrum!

LOANS TO PARTICIPATORS - Conundrum!

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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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Euan's picture
By Euan MacLennan
26th Nov 2010 18:15

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. 

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By User deleted
26th Nov 2010 21:51

Possibly no BIK, either

What were the loans used for?

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By GEOFFMILLS
27th Nov 2010 09:44

LOANS TO PARTICIPATORS - Conundrum!

The loans were used to subscribe for shares in Y Ltd

 

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By GEOFFMILLS
27th Nov 2010 09:47

LOANS TO PARTICIPATORS - Conundrum!

Under what section are they assessed? They are not employees or related to any director or participator of X Ltd. 

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By Marion Hayes
28th Nov 2010 08:20

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

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