EM8640 - Close companies: settlement: extractions treated as loans

After the loan accounts for directors and/or participators have been rewritten EM8620+ the following principles should be used to compute the amounts to be included in the settlement in respect of S455 and/or S464A liabilities.

  1. The gross liability under S455 and S464A, without taking into account S458 or S464B relief, arising for each AP in the period covered by the enquiry should be recovered along with the interest thereon. Interest arises from 9 months and 1 day after the end of the AP in which the loan was made (S87A).
  2. Do not include S455 or S464A liability for a loan or advance made in an AP that is repaid etc. earlier than 9 months and 1 day from the end of that AP.
  3. Penalties arise on the gross S455 and S464A liability included in the settlement.
  4. Any relief under S458 and S464B is given against the tax due for the AP in which the loan or advance was made. Relief does not reduce the amount of tax, interest and penalties recoverable but may reduce the amount to be paid EM8642.
  5. When one repayment etc. results in relief under S458 or S464B for more than one AP, the relief should be given on a first in, first out basis.

Where settlement is not by contract the necessary assessments and amendments should be made in accordance with the guidance in ADP for Companies and COM (Company Online Manual).