Close companies: loans to participators: by controlled companies
Section 422 brings certain loans not otherwise caught within ICTA88/S419 and ITTOIA05/S415+.
The loans affected are loans made under arrangements in which:
- a loan is made by a third party to a close company participator or associate of a participator,
- the close company effectively finances the making of the loan.
Such arrangements normally involve the close company having or acquiring control of the lender. As such, the application of ICTA88/S422 is limited to loans made to participators in a close company (or their associates) by a company that is, or comes to be, under the control of the close company.
You should construe ICTA88/S422 as one with ICTA88/S419. Any reference in Section 422 to a ‘loan’ includes an advance. Similarly, any reference to a company making a loan includes cases in which a company is, or if it were a close company would be, regarded as making a loan by virtue of ICTA88/S419 (2).
The powers of information in FA89/SCH12 Part 1 (CTM61505) apply to ICTA88/S422 just as they do to ICTA88/S419.