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HMRC internal manual

Company Taxation Manual

Close companies: loans to participators: by controlled companies

ICTA88/S422 (6)

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.