james burton
Share this content

Limited company loan subject to S419 ICTA 1988 rules?

Limited company loan subject to S419 ICTA 1988...


I wonder if tax per s419 ICTA 1988 rules, or any other similar rules, would be due on the following:

The limited company in question has an accounting year-end date is 31 August 2011.  On 1 February 2011, it lent £40000 or so to an individual not related to the company in anyway.  This person was merely a personal friend of the company's Director.  This individual intends to repay it in full by 31 August 2012, but there is a chance they may not.  There also exists the chance of the company never recovering a penny from the individual.  But that's not really the issue right now.  Is any tax due on the £40000 (similar to S419 rules, where the tax would eventually be repaid on repayment of the loan) or do no such or similar rules apply; meaning that, for the time being, the amount should merely be shown upon the Balance Sheet as either 'other debtors' or 'investments'?

Any advice would be much appreciated.



Please login or register to join the discussion.

30th May 2012 14:13

No s455 ( ex s419) tax

If the borrower is unconnected with any of the company's shareholders - associates being defined in the legislation - there is no charge to corporation tax on the outstanding loan.


Thanks (0)
30th May 2012 14:44

The company might be contravening it's articles if it has lent money without good purpose and a less than commercial rate of interest. Similarly the directors may be failing in their fiduciary duty and be called to account by the shareholders.

Why was the money lent? 

Thanks (0)
31st May 2012 12:52

Loan relationships

If the loan does go bad then the company won't get CT relief for any write-off due to the unallowable purpose rule which denies a LR debit for a loan which is not in the business or commercial interests of the company - which this clearly isn't.



Thanks (0)
Share this content