on the appication of s464c in practice

confusing issue

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Hi

I have two questions on the application in practice of a very confusing piece of legislation and I would appreciate your help:

A) S464c.1 CTA2010:  does s.464c.1 also apply when the further advance within 30 days is actually prior to the repayment of the original loan? E.g. loan b/fwd from previous year £10k, further advance £6k in 8 months and repayment £10k within 30 days before the 9 months?

In the above example, under s464, what is the order of set off? Weill the repayment be applied against the b/fwd loan or the current year one?

B) S.464c.3 CTA2010:  if there are fresh advances in the current year (in addition to the loan b/fwd from the previous years) and a repayment subsequently before the 9 months, do the further advances amount as “arrangements or intention to redraw the amount” under s464c.3, even though those advances occurred before the repayment? E.g. b/f loan £15k with further advances in the new year £20k and then a repayment of £15k.   

many thanks in advance.

Replies (3)

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By Exector
12th Jun 2018 17:57

Haven't looked at your scenarios in detail, but this HMRC flow chart on the operation of the anti B&B provisions might help:

https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm61645

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Replying to Exector:
neand
By neanderthal
12th Jun 2018 18:08

thanks for the reply - i have already looked at that. not really useful. i am surprised no one else is concerned about clarifying those frequently encountered practical issues among ltd companies.

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By chicken farmer
13th Jun 2018 10:43

Question A: the general rule is that loans are repaid on a FIFO basis - see CTM 61600 under the heading 'Which debt has been repaid?' But this can be overturned by s. 464C.

Question B: I share your confusion about the flowchart! But everything seems to hinge upon whether there was 'an arrangement' at the time of the repayment to make a further loan. In your scenario I think it could be argued that there was not - the further loan had already been made before the repayment so any arrangements had already been carried out and they could not have still been in existence at the date of the repayment. However you would need to consider all the relevant circumstances surrounding the further loan and the subsequent repayment.

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