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s.455 Query

s.455 Query

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I have a query regarding s.455 and any help is greatly appreciated.

Say a £40,000 was taken out 3 and a half years ago and a £13,000 charge was paid what happens when the 4th financial year passes? If the £13,000 is written off by HMRC what is the dr/cr? Is the £40,000 still outstanding to the company or is the s.455 charge being taken HMRCs way of taking that £40,000 as a dividend? If the £40,000 is then still due back to the company, I assume this is then excluded from future CT600A's?

Apologies for my naivety, I’m a student..

Replies (9)

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Psycho
By Wilson Philips
13th Oct 2021 23:07

Your mistake is in thinking that HMRC would “write off” the £13k. Where did you get the idea that would happen?

In general, one of two things will happen -

The borrower will repay the loan to the company with a consequent refund of the s455 tax.

Or the company will waive the debt in which case the s455 tax would again be refunded and the borrower treated as having received a dividend.

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By Paul Crowley
14th Oct 2021 10:09

I think there is a misunderstanding
If the loan is repaid, then there is only 4 years to reclaim the s455 refund of tax from HMRC.
HMRC do not repay s455 unless asked to do so

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Replying to Paul Crowley:
By SteveHa
14th Oct 2021 11:44

And as much as it shouldn't need to be said, only if it was paid to them in the first place.

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Replying to Paul Crowley:
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By I'msorryIhaven'taclue
14th Oct 2021 12:47

I suspect the OP has read 4 years to reclaim as 4 years from the date the original s455 charge arose, rather than 4 years from its repayment.

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Replying to Paul Crowley:
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By TheNovice
14th Oct 2021 12:50

So if as in the origional example there is a £40K loan with 13K s.455 (that has been paid by taxpayer). This loan has been outstanding for 6 years - nothing happens to the s455, it just stays on the account and then of course nothing happens to the loan?

The 4 year rule is only in relation to the repayment of the s455. If the client pays the loan back in full today the repayment form could be filled in and repayment requested even though the the origional loan was 6 years ago?

Final bit on that, would it just be the LP2 form that is completed rather than any amendment to the CT return as it would be outside the amendment period.

Thank you everyone for your help, looks like my understanding was well off.

Thanks (0)
Replying to TheNovice:
Psycho
By Wilson Philips
14th Oct 2021 13:10

You now have a pretty good grasp of it. The only CT600 that is normally affected is the one for the period in which the loan is made. There are exceptions, but that would only confuse you!

Yes, claim for repayment is done outside the return. Form LP2 is fine in the case of a straightforward loan and repayment. For anything any more complicated, ie multiple advances and repayments, the form is pants. All of our claims are done by letter.

Remember that repayment of the tax is due 9 months after the end of the period in which the loan is repaid etc so no point in filing the claim until nearer that time.

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Replying to Wilson Philips:
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By TheNovice
14th Oct 2021 14:45

Thank you, that's extremely helpful also thank you for the practical element too.

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Replying to Wilson Philips:
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By Paul Crowley
14th Oct 2021 15:11

Agree
Standard form designed for only the simplest of situations

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Replying to Wilson Philips:
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By AndyC555
15th Oct 2021 11:00

"no point in filing the claim until nearer that time."

In fact if I recall correctly, the on-line form won't let you fill it in until you can claim.

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