Loans to Participators

Introduction

A close company may make a loan to a participator or associate of a participator. Where this happens, the company must pay tax on the amount loaned, but can get the tax back when the loan is repaid.
Normally, the tax repayment has to be claimed separately and can’t be included on the return form.
The payment is due nine months and one day after the end of the accounting period in which the loan is made. If the loan is repaid to the company or otherwise discharged before this due payment date, then no payment is required.

Note: A close company is one that is under the control of five or fewer participants or any number of participants who are directors.

Tax Rate

Loans made on or after 6 April 2016 are taxed at 32.5% (to mirror the new dividend upper rate). The rate on loans made on or before 5 April 2016 is 25%. Repayment of loans will generate a repayment of tax at the same rate as was charged when the loan was made.

For accounting periods which straddle 6 April 2016, different rates will be applied to loans made before and those made on or after 6 April 2016.

Completing Loans to Participators

Periods ended before 6 April 2016

Loans Made During the Period and Outstanding at the End of the Period

You should only enter in this section details of loans which were made during the period and which haven’t yet been repaid.
Enter the name of the recipient of the loan and the amount advanced.

An additional row is created as you enter information on the empty row.

Loans Repaid, Released or Written Off Within Nine Months of Period End

You should only enter in this section details of loans which were made during the period and which have been repaid, released or written off within nine months of the period end.

Details of loans already in existence at the start of the period should not be entered here. You should instead include these in Total Loans Outstanding and Other Information.

Enter where indicated:

  • Name of recipient of the loan
  • Date of repayment
  • Amount repaid

An additional row is created as you enter information on the empty row.

Total Loans Outstanding and Other Information

Loans have been made during the period which have been released or written off before the end of the period Tick this box if any loans made during the period have been released or written off (but not repaid). This is an HMRC reporting requirement and populates box A1 on page 2 of the supplementary pages CT600A.
Total loans brought forward Enter the total amount of outstanding loans brought forward from earlier periods.
Brought forward amounts repaid, released or written off in the period Enter the total amount of loans brought forward from earlier periods which were repaid, released or written off in the current period.
Total loans made during the period and outstanding at the end of the period The Total loans figure at Loans Made During the Period and Outstanding at the End of the Period, above.
Total of all loans outstanding at end of return period Calculated as Total loans brought forward, plus Total loans made during the period and outstanding at the end of the period, less Brought forward amounts repaid, released or written off in the period.

Periods straddling 6 April 2016

Loans Made During the Period and Outstanding at the End of the Period

It is important to ensure that you enter each loan in the section appropriate to the date that the loan was made, either on or before 5 April 2016 or on or after 6 April 2016. Entering the loan in the wrong section will cause a miscalculation of the tax liability.

You should only enter details of loans which were made during the period and which haven’t yet been repaid.
Enter the name of the recipient of the loan and the amount advanced.

An additional row is created as you enter information on the empty row

Loans Repaid, Released or Written Off Within Nine Months of Period End

There are two sections for Loans Repaid, Released or Written Off Within Nine Months of Period End. The first section deals with loans made on or before 5 April 2016 and the second section with loans made on or after 6 April 2016. It is important that you enter repayment details in the right section, to avoid a miscalculation of the tax liability. It is the date on which the loan is made which determines the relevant section, not the repayment date.

Enter where indicated:

  • Name of recipient of the loan
  • Date of repayment
  • Amount repaid

An additional row is created as you enter information on the empty row

You should only enter in this section details of loans which were made during the period and which have been repaid, released or written off within nine months of the period end.

Details of loans already in existence at the start of the period should not be entered here. You should instead include these in Total Loans Outstanding and Other Information.

Total Loans Outstanding and Other Information

Loans have been made during the period which have been released or written off before the end of the period Tick this box if any loans made during the period have been released or written off (but not repaid). This is an HMRC reporting requirement and populates box A1 on page 2 of the supplementary pages CT600A.
Total loans brought forward Enter the total amount of outstanding loans brought forward from earlier periods.
Brought forward amounts repaid, released or written off in the period Enter the total amount of loans brought forward from earlier periods which were repaid, released or written off in the current period.
Total loans made during the period and outstanding at the end of the period The Total loans figure at Loans Made During the Period and Outstanding at the End of the Period, above.
Total of all loans outstanding at end of return period Calculated as Total loans brought forward, plus Total loans made during the period and outstanding at the end of the period, less Brought forward amounts repaid, released or written off in the period.

Periods starting on or after 6 April 2016

Loans Made During the Period and Outstanding at the End of the Period

You should only enter in this section details of loans which were made during the period and which haven’t yet been repaid.
Enter the name of the recipient of the loan and the amount advanced.

An additional row is created as you enter information on the empty row

Loans Repaid, Released or Written Off Within Nine Months of Period End

You should only enter in this section details of loans which were made during the period and which have been repaid, released or written off within nine months of the period end.

Details of loans already in existence at the start of the period should not be entered here. You should instead include these in Total Loans Outstanding and Other Information.

Enter where indicated:

  • Name of recipient of the loan
  • Date of repayment
  • Amount repaid

An additional row is created as you enter information on the empty row.

Total Loans Outstanding and Other Information

Loans have been made during the period which have been released or written off before the end of the period Tick this box if any loans made during the period have been released or written off (but not repaid). This is an HMRC reporting requirement and populates box A1 on page 2 of the supplementary pages CT600A.
Total loans brought forward Enter the total amount of outstanding loans brought forward from earlier periods.
Brought forward amounts repaid, released or written off in the period Enter the total amount of loans brought forward from earlier periods which were repaid, released or written off in the current period.
Total loans made during the period and outstanding at the end of the period The Total loans figure at Loans Made During the Period and Outstanding at the End of the Period, above.
Total of all loans outstanding at end of return period Calculated as Total loans brought forward, plus Total loans made during the period and outstanding at the end of the period, less Brought forward amounts repaid, released or written off in the period.

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