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The Red Book wording para 2.42 indicates the increased s455 tax rate of 32.5% will apply to new loans or benefits conferred after 5 April 2016. Blimey!

Do we advise clients to borrow today at lower company tax cost and is this going to trigger an adviser's nightmare dating owner director drawings?

Will there be split rates on CT600As? Do we advise some clients to end an accounting period 31 March 2016 to be sure of the 25% rate?

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By DJKL
16th Mar 2016 15:47

Having just dealt with one re the 2013 changes re partnerships, HMRC in enquiry mode were pretty pragmatic, we split the movements within the year (in this case  31 December 2013) by months and then the calculation was based on movement from 31 March 2013 onward.

Whilst you will need to (I imagine) prepare a record  across the change (need to see the small print) unless vast number of transactions it ought not to be impossible.

I think springing a new year end sounds like overkill but hard to really make the call until we see what we have (the legislation)

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By Ruddles
16th Mar 2016 15:52

Yes there will be different rates

But there is no tax cost to the company. A cash flow impact, yes.

Do we advise clients to borrow today...? No, we advise clients not to borrow. That's the facetious response. In reality, of course, if a shareholder is thinking of borrowing £40k in the next few weeks we would advise him to do so before 6 April 2016 (unless perhaps if the company's year end is 30 April. It may depend on intentions re repayment).

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By mabzden
16th Mar 2016 16:31

CT600A

I'll be surprised if there are any change to the CT600A form. There are problems (i.e. different rates for different loans), but these issues will only affect APs straddling 6 April 2016.

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16th Mar 2016 16:36

Unless a year end of 05/04/16

mabzden wrote:

I'll be surprised if there are any change to the CT600A form. There are problems (i.e. different rates for different loans), but these issues will only affect APs straddling 6 April 2016.

Unless a year end of 05/04/16 then any accounting period will relate to the two rates and will need to have two rates on the form.

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By DJKL
16th Mar 2016 17:37

I will be surprised if there is not a change on the form

mabzden wrote:

I'll be surprised if there are any change to the CT600A form. There are problems (i.e. different rates for different loans), but these issues will only affect APs straddling 6 April 2016.

No self respecting chancellor is going to not accommodate the possibility of changing the rate  (Increasing) in the future.

The thrust of tax policy appears to be towards  lower corporate rates but higher personal rates, whilst of course this charge is on the company it is intended to penalise directors who do not distribute company funds through HMRC preferred (higher tax) routes.The previous changes re capital treatment on winding up is  all part and parcel of a cohesive message, carefully announced prior to announcing lower CGT rates.

The message is clear, we like business, we like business profits, you must reinvest profits in the business as taking them out will be expensive.

A party can be business friendly whilst hammering individuals so I expect taxes on dividends/distributions etc to carry on increasing and s455 charge to move in tandem, so makes sense to adjust the form to accommodate.

Welcome to Sweden!!!!

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By Ruddles
16th Mar 2016 18:41

There MUST be a change to the form

Even if only temporarily. Because its current design simply doesn't cater for the straddle periods

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By Makkusu
17th Mar 2016 19:32

Clarification of straddling APs

So have we clarification that an AP straddling 15/16 & 16/17 will be accountable to both rates?

a) Will the loan be apportioned over the AP, or,

b) Will we need to date loan advances and treat accordingly?

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By Ruddles
17th Mar 2016 19:41

Yes

Both rates will apply to a company straddling 6 April 2016.

Each advance will need to be dealt with separately. I haven't worked it through to the end, but careful thought may be needed when it comes to looking at repayment - one imagines that in most cases repayment within the 9 months will be dealt with on a LIFO basis.

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17th Mar 2016 21:02

"For accounting periods which

"For accounting periods which straddle 6 April 2016 different rates will be applied to separate loans made or benefits conferred before, and on or after, 6 April 2016."

https://www.gov.uk/government/publications/corporation-tax-rate-of-tax-f...

It would appear that the company can decide what gets repaid first but I would imagine they would choose LIFO.

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