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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Close companies: capital payments to settlors: temporary loans

Certain temporary loans or temporary loan repayments made by a close company connected with the settlement to a settlor or settlor’s spouse are taken out of the scope of ITTOIA/S641 and hence ITTOIA/S633 by ITTOIA/S642.

The type of loan that can be excluded is one made:

  • to the settlor or his or her spouse,
  • by the close company, or another close company, connected with the settlement, or
  • by the settlor or spouse to that or any other close company connected with the settlement.

To be excluded:

  • the whole of the loan must be repaid within twelve months of the date on which it is made, and,
  • the period for which loans are made must not exceed twelve months in any period of five years.

Repeated ‘temporary’ loans will thus, in general, continue to be caught by Section 633 (subject to CTM61130).