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Repayment of directors loan and s455

When will s455 be repayable?

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My client has a long standing DLA and at y/e 30 September 2017 had paid £250k in s455 to HMRC. The draft accounts for y/e 30 September 2018 show an increase in the DLA and so more s455 will be due by 1 July 2019. However, the company is about to be sold and the DLA will be cleared from the sale proceeds. So far so good.

My question is the timing over the repayment of the s455 paid and whether the s455 to 30 September 2018 needs to be paid, as my colleague and I have different views on this.

My colleague argues that the increase in the DLA to 30 September 2018 will not trigger a s455 charge as it is repaid within 9 months i.e. before 1 July 2019 from the sale proceeds.

I think the DLA increase is aggregated into the existing loan and the 9 month rule is not in point. Therefore, the company will need to pay the s455 due for y/e 30 September 2018. I think the loan will only be treated as repaid in y/e 30 September 2020 and s455 will not be repayable until 1 July 2021.

Any thoughts (preferably with a legislative back up)?

TIA

 

 

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20th May 2019 16:17

At the risk of stating the obvious the legislation is in S455 CTA 2010 et seq. Have either of you read those sections?

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By Annetax
to Tim Vane
22nd May 2019 16:51

Yes, but we disagree on interpretation.

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By Matrix
20th May 2019 16:39

If the additional loan is repaid within 9 months then no s455 tax due and the s455 tax already paid will be repaid 1 July 2020 since the loan is repaid within the AP ending 30 September 2019.

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to Matrix
22nd May 2019 17:08

Agreed. Each advance is treated as a separate loan. There is no aggregation.

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