Ask an expert: Loans to participators

Paula Tallon

Question

My client owns all the shares in a trading company and regularly draws money out of the company for private expenditure which is debited to his director’s loan account. At the end of each year we review the position and our client is never sure how to rectify things. He would like to understand his options especially in the light of changes to the loans to participator rules that were introduced by Finance Act 2013.

Answer

Where a close company makes a loan to a participator and that loan is not repaid within nine months and one day after the end of the accounting period (‘the CT payment date’) in which the loan is made a charge to tax arises on the company under CTA 2010 s 455. The tax charge is 25% of the lower of the amount outstanding...

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