Corporate debt ― frequently asked questions

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

The following scenarios are intended to illustrate how the various rules governing corporate debt will apply in a variety of real-world situations. The scenarios are intended to be more complex than the most simple situations but not uncommon.

For a general overview of corporate debt, including the loan relationships and derivatives regimes, see the Corporate debt ― overview guidance note.

What happens to the write off of a loan relationship by a close company to a shareholder?

When a close company makes a loan to a participator (whether or not the participator is also an employee or director), a tax charge can arise for the company.

Anti-avoidance provisions ensure that loans (and other extractions of value) made by a company to a participator via an intermediary also fall within this charge.

If such loan is subsequently waived or written off, the close company can reclaim the section 455 tax charge.

However, there is no debit for loan relationship purposes as a result of the write off, even though this may not be a connected

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