CTM61620 - Close companies: loans to participators: repayment of - how relief is given
ICTA88/S419 (4), (4B)
CTSA (accounting periods ending on or after 1 July 1999)
A company can give effect to a claim under ICTA88/S419 (4) in its CTSA if the claim is included (by amendment or otherwise) in the return for the period in which the loan was made and relief is due at the time the claim is made (ICTA88/S419 (4B)). In all other cases, TMA70/SCH1A applies and relief is given by discharge or repayment.
Example 1
A company makes a return for the accounting period ended 31 December 2001 on 25 June 2002. It includes in this return a ICTA88/S419 (4) claim in respect of a loan made during the previous accounting period. As the loan was not made during the return period, a deduction for the ICTA88/S419 (4) relief cannot be made in the company's self assessment for that period. However, the claim was made within 12 months of the filing date for the return period in which the loan was made and is therefore an amendment to the company's return for that accounting period.
Example 2
Same as Example 1 except that the ICTA88/S419 (4) claim is in respect of a loan made during the accounting period ended 31 December 1999. Assuming that the company's filing date for the accounting period ended 31 December 1999 was 31 December 2000 and the return was not under enquiry, the claim was made outside the time limit for amending the company's return for that period and TMA70/SCH1A applies.
Pre-CTSA (accounting periods ending before 1 July 1999)
You should give relief by arranging for an adjustment in terms of tax, describing it as ‘ICTA88/S419 (4) relief’ and using the AC4816 report (see AC4816 and AC8558 (f)). The amount of the loan originally assessed should not be changed and the assessment must not be amended until relief under Section 419 (4A) is due (see AC4814 and AC4815).
Where the loan is fully or partly repaid (or released or written off on or after 6 April 1999) before an assessment is made, you should consider whether to make an assessment in order that the Collector might collect any Section 419 tax still payable because Section 419 (4A) applies (CTM61615) as well as interest due under TMA70/S87A (see CTM98250).
