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HMRC internal manual

Company Taxation Manual

Close companies: loans to participators and arrangements conferring benefit on participators: B&B: arrangements rule:


The bed and breakfasting of a loan which falls outside of a 30 day period, may nevertheless be chargeable under CTA10/S464C (3) which provides a backstop. It operates similarly to the 30 day mechanical rule and similarly treats any repayment as repaying a new loan (see the flowchart at CTM61645).

CTA10/S464C (1), the 30 day rule, takes priority; therefore if S464C (1) applies S464C (3) cannot apply to the same repayments/re-borrowings (CTA10/S464C (4) (b) (i)).

The arrangements rule applies only if the amount outstanding by the relevant person is at least £15,000 before a repayment is made and at that time (of the repayment) arrangements had been made whereby at least £5,000 of new loans (any chargeable payments) are to be made to that person and if those new loans have not previously been matched with another repayment.

‘Arrangements’ is not further defined and has a wide meaning. In appropriate cases detailed facts surrounding the repayment and the re-borrowing should be obtained (for example board minutes, correspondence/notes of interactions with bankers, both for the company and the participators and bank statements for both).

An arrangement can be multilateral or unilateral, ie it could be just the participator, just a third party or just the company making arrangements, putting in place the steps required for the new loan to be made after the repayment. For example a director could arrange with his bank to ‘borrow’ from his own personal savings account temporarily, arrange for the funds to be transferred to the company, having requested the bank to put the funds back into his personal account within say 10 days. The legislation can still apply even though the company looks to have no involvement in the arrangements

There are no time limits to the application of CTA10/S464C (3).

The provisions to stop double counting/relieving apply in the same way as for CTA10/S464C (1), see CTM61640 but, as above, with the additional step of having to consider the application of the 30 day rule to any repayment first.

You will need to consider whether CTA10/S464C (6) applies to exclude the operation of the restriction of the relief, see CTM61642.

If you consider that Section 464C (3) may apply in a specific case please refer the case with all of the papers to CTIS (Technical).