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Will s455 tax be due on this loan?

Is s455 tax due on a loan to a minority shareholder in a subsidiary company?

Mr Shafter owns A Ltd, a close company. It holds 100% of the shares in B Ltd and 90% of the shares in C Ltd.

The other 10% of shares are owned by Mr Sucker. He is not an associate of Mr Shafter per the legislation. Mr Sucker is not a director of any of the companies.

B Ltd loaned Mr Sucker £150,000.

Is there s455 tax to pay on this?

Mr Sucker is not a participator in B Ltd.

He is also not a participator in A Ltd, so the provisions of s460 are not triggered.

C Ltd has not loaned either A Ltd or B Ltd any money to fund this, and so the provisions of s459 are not triggered.

What does AWeb say? Is there any provision that captures this for s455 purposes?

I don’t think it is caught but it seems too good to be true.


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By Ruddles
14th Nov 2018 13:36

Why is it too good to be true? A company lends money to an individual that has no connection whatsoever with that company. So why should there be a tax charge?

Not that it changes the tax analysis, but one presumes that Mr S is paying a commercial rate of interest - if not, why not?

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to Ruddles
14th Nov 2018 13:59

Too good to be true as it is surely ripe for exploitation.

If Mr Sucker happened to be the long term partner of Mr Shafter's daughter, all paperwork in his name, and the loan used to buy a home which they both live in, then it seems a rather easy way around the s455 hit.

It's not that scenario by the way, but it seems that this is something that could be abused, so I would have thought there would have been something to prevent it. Doesn't appear to be though so good news.

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By Ruddles
to Lone_Wolf
14th Nov 2018 14:19

In that scenario, there is a possibility that the surnames may need to be exchanged.

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to Ruddles
14th Nov 2018 14:23

That is true.

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