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Historically the close company rules had been manipulated to avoid the charges on the company and the participator. This had been achieved fairly simply in that a loan to a participator was repaid shortly before the date on which the close company charge became due, only for the same or a similar amount to be loaned again to the same participator in the following accounting period.

In order to prevent this abuse, anti-avoidance legislation exists to deny relief where loans (and prior to 30 October 2024, benefits) were ‘bed and breakfasted’ in this manner. Consequently, the relief is only available if the repayment / return payment is ‘permanent’.

The rules apply where either:

1. •

   within a 30-day period a participator has made repayments in excess of £5,000 and in a subsequent accounting period, new loans or (prior to 30 October 2024) benefits in excess of £5,000 are made to the same person or their associate

2. •

   where the total amount of a participator’s loan or (prior to 30 October 2024) benefit exceeds