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HMRC internal manual

Company Taxation Manual

Close companies: tests: open company loan creditor

CTA2010/S444 (3) (formerly ICTA88/S414 (5)(b))

A company is not to be treated as a close company if:

  1. it is only close by virtue of the control test in CTA2010/S450 (3)(d) (formerly ICTA88/S416 (2)(c)) (see CTM60220) or the ‘winding- up’ test in CTA2010/S439 (3)(a) (formerly ICTA88/S414 (2)(a))) (see CTM60320), and

  2. it would not be close if, for the purposes of those tests, open companies were not regarded as participators in respect of their interests in the company as loan creditors.

In arriving at the amount available for distribution among the participators, any amount due to an open company as a loan creditor (including any amount due to it as a holder of loan capital) may be disregarded if the result is that the company ceases to be close (CTA2010/S444 (3) (formerly ICTA88/S414 (5)(b))).

If the open company loan creditor also holds shares in the company, it will remain a participator in respect of that holding and any amount which would be distributed to it in respect of those shares should be taken into account for the purposes of CTA2010/S450 (3)(d) and CTA2010/S439 (3)(a).