How do I reclaim s.455 tax on loans to participators? Which form do I use? Where can I find the link?

This is a freeview 'At a glance' guide to reclaiming s.455 tax paid on loans to particpators.

Corporation Tax: reclaim tax paid by close companies on loans to participators (L2P). 

When a close company makes a loan or advances money to a participator and it remains outstanding more than nine months after the company's year-end, the company may be liable to a tax charge under section 455 CTA 2010.

This tax charge is calculated as a percentage of the value of the outstanding loan: 

  • 25% before April 2016.
  • 32.5% April 2016 to April 2022.
  • 33.75% April 2022 onwards.

HMRC provide an online claims facility that can be used by close companies to obtain a refund of s.455 tax paid when a loan to a participatory has been repaid, released or written off.

  • Relief cannot be reclaimed until 9 months and 1 day has passed since the end of the accounting period in which the loan was repaid (mirroring the s.455 payment due date).
  • Where there are multiple loans and only a partial repayment is made you can specify which loans have been repaid. If you do not the loans will be treated as repaid on a first in first out (FIFO) basis.
  • The claim can be completed by:
    • A tax agent, using their Agent Services Account.
    • The company, via their Government Gateway Account. 

The other tax consequences, for both the company and participator, of a loan that is released or written off are considered in detail in our guides.

Useful guides on this topic

Directors' loan accounts: Toolkit
HM Revenue & Customs (HMRC) do a toolkit for advisers. This is our enhanced version with planning points. 

Close company loans toolkit (loans to participators)
This guide takes a detailed look at the Corporation Tax treatment when a close company makes a loan to a participator (director-shareholder). It also provides links to our guides for individuals on the making of loans to companies.

Unlawful, illegal or ultra vires dividends
Is there a tax charge on an unlawful/illegal or ultra vires dividend?

Tax planning for directors
Editor's choice: some of our favourite tax guides, toolkits & checklists for directors.

External link

HMRC Guidance: Reclaim tax paid by close companies on loans to participators (L2P)

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