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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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CTSA: Loans to participators: Claims to relief - action to take

ICTA88/S419 (4A) &(4B), TMA70/SCH1A, FA98/SCH18/PARA57 - 58

When you receive a claim to Section 419 (4) relief you need to consider what, if anything, you have to do with the claim.

If the claim is for a CTPF period see CTM98250 onwards. How relief is given is dealt with in CTM98225.

First you should consider whether the relief is due. If repayment, release or write off of the loan is made more than nine months after the end of the accounting period, then Section 419 (4A) defers relief until the due date for the accounting period in which the repayment etc. takes place, see CTM61605 onwards.

Some companies may prematurely include a Section 419 (4) claim in their returns before the relief is due. This is most likely to happen when a loan or advance in an accounting period is repaid, released, or written off after the due and payable date for that accounting period but before the return is delivered. If you find such a claim follow the guidance in CTM98225.

A claim for Section 419 (4) relief may affect the charge for one or more accounting periods. The following guidance on how Section 419 (4) relief should be claimed covers only the most common types of claim. If you have a case that does not fit into any of these categories contact the CT Business Helpdesk(This content has been withheld because of exemptions in the Freedom of Information Act 2000) .

ICTA88/S419 (4B)

You first need to consider Section 419 (4B), and the provisions of FA98/SCH18/PARA57 and 58, to decide whether or not a Section 419 claim is to be:

  • governed by the provisions of TMA70/SCH1A,
  • included in a return,
  • treated as an amendment to a return.

TMA70/SCH1A (which gives relief by discharge or repayment) applies to claims for Section 419 (4) relief unless all the conditions of ICTA88/S419 (4B)apply (in which case relief can be given effect to in the SA):

  • the loan was made during the return period, and
  • the claim is included in the return (by amendment or otherwise), and
  • relief may be given when the claim was made.

If the conditions of Section 419(4B) are met, and a notice to deliver a company tax return has been given, the most common situations will be as below.

A single Section 419(4)claim affects the charge for only one accounting period

This is seen most often when a loan taken out in one accounting period (AP1) is repaid in a later period (such as AP2).

Such a claim must be made in a return or amended return wherever possible (FA98/SCH18/PARA57 (2)). A valid claim cannot be made before the company delivers its return for the accounting period in which the loan was made. You should send back any claim made in advance of the return and explain that a valid claim can only be made as part of the return.

Where a claim affects only one accounting period and relief can be given in the SA any enquiry would be into the return or amended return.

If AP1 is under enquiry then any Section 419 (4) claim made by the company cannot take effect as an amendment until the enquiry is concluded (FA98/SCH18/PARA31 (3)). This means that you cannot give relief when the claim is made so the second condition of Section 419(4B) cannot be met.

Consider the merits of the claim in the context of your emerging findings from the enquiry. Deal with the claim under TMA70/SCH1A/PARA4 that gives you the discretion to repay provisionally to such extent as you think fit. See the On-line Company Tax Manual (COM), in the Claims/Reliefs business area for details on how to make the repayment.

A single Section 419(4) claim involves the charge for more than one accounting period

This is seen most often when loans taken out in more than one accounting period (AP1 and AP2) are repaid in a later accounting period (such as AP3).

Such a claim will usually be made in a company tax return but does not have to be. If you receive a claim that is not made in a company tax return, but the return is capable of being amended, then treat the claim as an amendment of the return. The claim is treated as amending all relevant returns that are capable of being amended (FA98/SCH18/PARA58 (2)).

Unless all accounting periods being relieved are capable of amendment TMA70/SCH1A applies to the claim and any enquiry will be into the claim rather than the return, (see the Enquiry Manual).

A multiple Section 419(4) claim involves the charge for more than one accounting period

Exceptionally, a company may make more than one claim for relief when loans which have been taken out in more than one accounting period (AP1 and AP2) are repaid, released or written off in a later accounting period (such as AP3). Each claim must be considered separately to see whether it is treated as an amendment to the return. If the conditions of Section 419 (4)(B) are not met, then TMA70/SCH1A governs the claim.

Any enquiry will be into the claim if TMA70/SCH1A applies, or into the return/amended return if it does not.