sec 455 former shareholder/director

sec 455 former shareholder/director

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Company is a close company. Director has been dismissed for gross misconduct and via a shareholder resolution is resigned as a director. Under the shareholder agreement the shares have been acquired back by the company at par value.

A loan is currently outstanding to the company of £50K.

The company is commencing action to recover the loan however it is unlikely that this will be successful due to the finances of the former director/shareholder.

Is Sec 455 tax due if the loan is still outstanding at the company year end. The year end is after the resignation of the shareholder and the shares are no longer held by her at the year end?

Replies (7)

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Portia profile image
By Portia Nina Levin
15th Nov 2014 13:41

There is one important fact

And you could not be arsed to tell us.

When the £50K loan arose, was the individual a participator in the company. The answer to that question will be the same as the answer to yours.

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By johngroganjga
15th Nov 2014 13:58

Presumably the loan has already been reduced by the par value of the shares acquired.

Presumably the debtor was a shareholder when the loan was made. Difficult to imagine that a new loan would have been advanced after the debtor was dismissed for gross misconduct. Then yes it's within S455 until repaid, waived or written off.

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Replying to Justin Bryant:
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By paramol
15th Nov 2014 16:58

thank you. Yes the loan has been reduced by the par value. Presumably had the loan been written off prior to the year end Sec 455 would not be applicable.

If the loan is written off prior to the year end for a former shareholder/director I believe that National insurance would not be due. 

 

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Portia profile image
By Portia Nina Levin
15th Nov 2014 14:08

I am sure your assumptions are correct John

Nonetheless, why can people not tell us the important facts, rather than making us all just guess? It is very annoying.

I am sure if a client wandered into their office and said, "I'll send my books and records to you in a couple of weeks, but in the meantime can you tell me how much tax I have got to pay?", they would get an earful!

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By paramol
15th Nov 2014 16:35

Sorry to have upset you

Sorry to have upset you Portia!

Yes the loan was made when the individual was a participator. So in conclusion it appears that Sec455 applies dependent on the position of the individual at the time of making the loan and at the company year end i.e an advance to a participator was made during the period even though they are no longer a participator at the year end. 

 

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By paramol
15th Nov 2014 16:39

thank you Johnroganjga

Thank you Johnroganjga for your constructive feedback

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By johngroganjga
15th Nov 2014 18:27

The deadline for the loan to be repaid, waived or written off for S455 not to be applicable is in fact nine months after the year end, not the year end itself.

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