Save content
Have you found this content useful? Use the button above to save it to your profile.

Any Answers Answered: Basis period reform and S455


TAXtv’s Giles Mooney and Tim Good take another spin through the pages of Any Answers, this month tackling questions on section 455 and the basis period reform.  

13th Jun 2024
Save content
Have you found this content useful? Use the button above to save it to your profile.

To view the full questions and AccountingWEB readers’ answers click on the links below. To watch the video, click the play icon in the box above.

Directors loan interest and S455

The first question comes from user LDS24, who has a director who is looking to borrow an amount from the company, but with a commercial rate of interest charged.

The reader realises that if there is interest charged at a commercial rate, there is no benefit in kind. But they want to know if S455 is still payable on the overdrawn loan account where interest is being charged. 

The simple answer is ‘yes’, but as Giles Mooney said, this is often a “frequently misunderstood” area in tax. 

Tim Good went on to explain that the “benefit in kind rules and the section 455 loans participator rules are entirely independent of each other. 

“So it makes no difference if there’s a benefit in kind or not. If the company makes a loan to a participator or an associate of a participator, which would include director relatives and spouses, the company will have to comply with the section 455 rules.” 

Good carries on by looking at the different points raised by commenters to keep in mind when looking at S455 loan.  

Basis period reform/extended accounting period

The second question is incredibly topical. After two years of talking about basis period reforms in lectures, Mooney thought everyone had understood it, but as the question from SASKirk goes to show, people are still looking for guidance. 

The reader said, “I can't find any clarity on what you do if you extend an accounting period to match the new basis period in self-employment boxes 66 and 67.”

As SASKirk ties themselves in knots about the implications of the basis period reform, Mooney asks Good to cut to the chase and summarise what we need to watch out for.

Good said it is “by no means intuitive or self-evident” as to what should go in the boxes referred to in this question. 

As Good outlines the key points and the complexities of the reform, Mooney emphasises: “The sooner we start to look at this the better because we need to be on top of it. This is simply not something you can leave until January and hope it all pans out OK as you do the returns.” 

For the latest episode of TAXtv visit PTP Interactive.​ TAXtv is a monthly tax update programme available as an annual subscription (11 issues plus budget editions) to view online, download from the internet or watch on DVD.

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.