Corp Tax - Chapter 20

Question 1

When are non quarterly companies required to pay s.455

Answer 1

9M + 1 Day following end of accounting period.

Question 2

S.455 Rate

Answer 2

33.75%

Question 3

Amount of loan outstanding is the lower of the amount outstanding at:

Answer 3

• the last day of the accounting period; or
• the normal due date.

Question 4

Repayments or write offs

Answer 4

Tax will be repaid to the company

Question 5

Claims for relief dates

Answer 5

4 years of the end of accounting period.

Question 6

Bed and Breakfasting days

Answer 6

30

Question 7

b&b restrictions

Answer 7

• one or more repayments totalling £5,000 or more are made by a participator to a close company in respect of a loan to a participator;
• the participator borrows a total of £5,000 or more from the company in a subsequent accounting period.
• immediately before a repayment there is a loan outstanding of £15,000 or more from the company,
• at the time of the repayment there are arrangements to draw further
  advances of money from the company to replace some or all of the amount repaid
• the amount of the new borrowing under the arrangements is £5,000 or more,

Question 8

When does 30 rules not apply

Answer 8

If employee received a bonus and used the money to repay the loan back.

Question 9

Implications of write off to participator.

Answer 9

The participator will be treated as receiving a dividend equal to the amount of the loan written off or released

However, it is not a dividend from the company’s point of view. The release or writing-off gives rise to a debit under the loan relationship rules, but this is not an allowable deduction for corporation tax purposes.

Question 10

Where the participator or associate is an employee, (Write off)

Answer 10

Earnings from employment for National Insurance purposes. It will be
subject to Class 1 NICs, so the employee will pay 12% or 2% of the amount released or written off depending on the level of their employment income, and the company will pay Class 1 NICs at 13.8%.

The NICs paid by the company are a deductible expense for the company. However, where the loan was made to a participator in their capacity as shareholder rather than as director, then no NICs
are due.

Stewart Fraser Ltd v HMRC