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still connected?

still connected?

My client was a 50% shareholder in a company and whilst a shareholder (and director) created an overdrawn DLA of £100k plus.

Whilst he was in that situation he would of course fall foul of all the s455 etc problems.

However my client then divorced and gave his shareholding to his wife and resigned as a director, whilst leaving the loan in place in the company.

The loan has now been written off as irrecoverable.

My questions are:

1. Is any s455 formerly paid now repayable?

2. What is the status of the write off? Previously it would have been a distribution or possibly treated as emplyment income, but my client no longer has any connection with the company.

Oh and it's a 30th April 2012 year end brought in two days ago, so no pressure!


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30th Jan 2013 08:47

1. Yes - if the loan is wrttien off the s455 tax becomes repayable to the company. This will be reapyable by either amending the CT return of the period in which the loan was made (if in time) or otherwise writing to HMRC>


2 - The person to whom the loan was made will be taxed under s419 ICTA 2005 - at the dividend rate.



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By blok
30th Jan 2013 09:22


arthur, where do you stand on NIC on the loan w/o?

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30th Jan 2013 09:23

I think Arthur means...

... S.415 ITTOIA 2005 in part 2 of his post.  Otherwise I agree with him.

The determing factor is not  whether the individiual is a participator or an associate of a participator now, but whether, when the loan first arose there was a charge under S.455 CTA 2010 (formerly S.419 ICTA 1988).

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30th Jan 2013 09:34


If it's written off after the employment/directorship has ended, it's very hard for HMRC to argue that it's earnings I think.

Incidentally, there's a difference between the company writing the loan off in its books, because there's little prospect of recovering it, and it agreeing with the debtor to formally release or write off the loan.

However, if there is little chance of recovery, it is probably beneficial for the company to so agree in order that it can recover the S.455 tax.

With that basis of logic (the company doing it for its own benefit), it becomes even harder for HMRC to argue that the release or write off is earnings for NIC purposes.

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30th Jan 2013 10:12

thanks - so

from the company point of view, loan written off = s455 comes back, which ever way we cut it

from the individuals point of view if the loan is not written off then there is no tax impact on the individual but s455 stays as due and no P11D benefit arises

if the loan is eventually written off as irrecoverable we may not have any tax impact on the individual but s455 comes back

if the loan is written off now as irrecoverable it isn't a distribution or possibly income

if the loan is written off as part of a deal then there are tax implications

I have to say my head hurst now and as the client only brought th books in a couple of days ago i am going down the path of least resistance and leaving it in and taxable under s455 until i have all the paperwork and also the brain space to deal with it.


Thanks for the help.

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