s419 tax relief when no corporation tax

s419 tax relief when no corporation tax

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A director/shareholder's account with the company is seriously overdrawn. The loan is written off in the company's books prior to 9 months after the end of the accounting period and S419 25% becomes due. However, the s419 tax cannot be offset against the corporation tax bill because profits are too low and that may also be the case in the future. Can the company claim relief for irrecoverable s419 tax in any other way? Thanks.
jimmy

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By AnonymousUser
01st Jun 2006 18:28

Not quite sure what you are getting at
Jimmy, this seems a strange question, and perhaps I have misunderstood you.
The position is this. When a close company writes off a loan to a participator, it can as a rule claim repayment of the 419 tax. (The circumstances in which it cannot make a claim are all unusual – for example where the debtor was not a participator at the time of the loan or where the company is outside the charge to CT when the debt is w/o).
This means the 419 tax the company paid is due back from HMRC. For example, if the company made the loan in its AP to 31.12.2005 and the loan is written off on or before 01.10.2006, no 419 tax is payable (the net figure would be NIL).
Assume however the company had, say, made a loan of £100,000 in the 31.12.2004 AP, and the loan was wholly written off after 01.10.2005 in the 2005 AP. The £25,000 sec 419 tax paid on 01.10.2005 would then be paid back (on 01.10.2006), or set against the 2005 liability.
Of course there may be an IT charge on the director/shareholder. This however is wholly separate from the tax on the company.
Does this answer your question?

Harry

Harry Ross is a tax consultant practicing in London. He can be contacted on 020-8446 4193. Email: [email protected]

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