ECH17020 - Directors: Liaison - S160/S419 ICTA 1988

ECOs should

• check whether the S175 benefit (see EIM26101 onwards) has been correctly reported on form P11D.

In cases where it has not the ECO should always remember

• that loans by close companies to directors or overdrawn directors' current accounts may be chargeable to tax under S419 ICTA 1988 on the company as well as there being a charge on the individual under S175 ITEPA 2003
• loans are not earnings for NIC unless they are written off or can be shown to be in anticipation of earnings
• if there is a tax charge on the individual, Class 1A NIC will be due from the company from 6 April 2000, see NIM12020 and
• never to settle with directors personally before the affairs of the company have been considered by the Business Accounts Inspector.

In all S175 benefit cases the ECO should

• report the findings to the Business Accounts Inspector and
• not ask questions about records that are outside the scope of Regulation 97 to avoid prejudicing a paragraph 24 enquiry (the CT equivalent of Section 9A).