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Company loan to relative

S455 tax - is it applicable under the following circumstances?

We have a client who trades as a Limited Company. He's looking to raise a loan within the company to help a family member (brother) set up his own business.

I understand that under the S455 rules a loan to an "associate" is caught but a couple of other options I'd like a second opinion on:

1, loan to associate's partner

2, loan to a partnership (her brother and partner are considering setting up the business as a partnership)

3, loan to a limited company - if our client was involved. Thinking of this being treated as inter-company. What would the involvement of our client need to be in this company for it to be treated as inter-company. % shareholding? Directorship?

Thanks

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16th May 2018 16:38

Face this is palm. Palm this is face.

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16th May 2018 16:44

What do you mean by "treated as inter-company"? A loan by one company to another is an inter-company loan simply by virtue of the natural meaning of those words in the English language.

A loan by your client's company to another company would not attract a S455 liability for his company unless your client was not a participator in the debtor company and it made a loan to him up to the amount of his company's loan to it.

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16th May 2018 18:22

Give your client shares in newco, loan the £ to newco. Someone might correct me, but non-voting B shares might even pass the test to be a participator:

https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60107

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