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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Close companies: extended meaning of distribution: valuation of benefits

CTA2010/S1064 (3) (formerly ICTA88/S418 (4)) provides that the amount of expense to be taken into account under CTA2010/S1064 (1) and (2) (formerly ICTA88/S418 (2)) and CTA2010/S1065 (formerly ICTA88/S418 (3)) as a distribution shall be the same as would under ITEPA2003/Part 3 (formerly ICTA88/Chapter II of Part V) (see SE21001 onwards) be the cash equivalent of the resultant benefit.

The use of the income from employment rules is limited to the determination of the amount. It should not be taken as extending the scope of CTA2010/S1064 (1) and (2) beyond benefits provided by a close company for its participators (including participators in a company which controls it - CTM60107 and CTM60110) and their associates (CTM60150) in connection with which the close company itself incurs expense.

The following guidance should be followed to determine the amount to be treated as a distribution under CTA2010/S1064 (1) and (2) and S1065..

  • Assets transferred to participator or associate, SE21640 (second to fifth subparagraphs) onwards.
  • Assets used by participator or associate but not transferred:
    • Cars. The SE23004 scale charge applies, increased where appropriate, in accordance with SE23130 and SE23131.
    • Accommodation. Strictly the measure of the benefit is that provided by ITEPA2003/S203 to S207 (formerlyICTA88/S156 (5), (6) and (7)). In practice the guidance at SE11431 may be followed as this gives the same result.
    • Cheap loans. Enquiries about the possible application of CTA2010/S1064 in relation to benefits derived by close company participators and their associates from interest free or low interest loans should be referred to CT&VAT (Technical).