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HMRC internal manual

Company Taxation Manual

Close companies: capital payments to settlors: loans paid directly or indirectly

Loans that are ready for repayment can be assigned for full consideration to third parties prior to repayment. ITTOIA/S634 (5) blocks this avoidance route by providing that sums paid to such parties by virtue of assignments are within Section 677.

ITTOIA/S634 (7) closes another avoidance route by requiring that payments by trustees or connected close companies into joint accounts in the names of the settlor (or his or her spouse) and another person should be included in sums paid directly or indirectly to the settlor or spouse.