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Hello Sir,
I am a P6 self study student.Could you please explain me the rule for Loan to share holder if the company is close and if it is not a close company. ThanksIf the company is a close company and makes a loan to a shareholder it will be required to pay a tax charge of 25% of that loan to HMRC due when the CT liability is due for the accounting period in which the loan was made.
A close company prepares accounts to 31 March each year and lends £40,000 to a shareholder in June 2014.
The company will have to pay over £10,000 (25% x 40,000) by 1 January 2016 (June 2014 falls in y/e 31/3/15 for which tax will be due 1 January 2016.
This tax charge will be repaid to the company if the loan is either repaid or w/off. If the loan is w/off then this will also be treated as a net dividend received by the shareholder at the date of the w/off
This only applies if the company is a close company
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