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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 - giving effect

ICTA88/S419 (4B)

How relief for Section 419 (4) claims is given depends on whether all the conditions of Section 419(4B) apply, namely:

  • 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 not met:

  • the company cannot give effect to the claim in its SA. The claim is given effect by the Revenue through discharge or repayment (TMA70/SCH1A). The On-line manual COM gives details as to the procedure to follow in COTAX to give any relief under Schedule 1A. See “ICTA88/S419 (4) - Giving Effect To Claim” in the “Other Reliefs” section of the “Claims/Reliefs” business area.

If the company has incorrectly given effect to the relief in its self-assessment, then you will need to correct its company tax return to remove the relief.

If the conditions of Section 419 (4B)are met:

  • the company can give effect to the claim in its SA.

No further action is needed if the claim meets the conditions in ICTA88/S419 (4B), and the company has given effect to the relief in its SA.

Exceptionally, the company may include a claim in its company tax return but not give effect to the relief in its self-assessment. If this is the case you should treat the claim as amending the SA, subject to the conditions of Section 419 (4B) being met.

What to do when Section 419 (4) relief is not due

You may receive a return that includes a Section 419 (4) claim but relief is deferred under Section 419 (4A) so that relief is not due at the time the claim is made. The relief is not available until the due date of the accounting period in which the loan was repaid, released or written off (see CTM98220).

You should consider whether you need to enquire into the claim under TMA70/SCH1A/PARA5. Alternatively, as part of your risk assessment of the return you could consider enquiring into the return.

If you decide to make no enquiries you should correct the return so as to exclude the Section 419(4) relief. This will ensure the correct tax payable is recorded. This tax is payable, even if the loan has been repaid, released or written off. You may also find it useful to put the file on special BF to the date when you can give effect to the claim under Schedule 1A by discharge or repayment.

To find out how to deal with these claims in COTAX see the On-line Company Tax Manual (COM), “ICTA88/S419 (4) - Giving Effect To Claim” in the “Other Reliefs” section of in the “Claims/Reliefs” business area.

Details of examples

See Example 1 in CTM98230 for a case where Section 419 (4) relief is given in an amended return because:

  • a loan is repaid, released or written off earlier than nine months and one day after the end of the period, and
  • the company has already submitted its original return.

See Example 2 in CTM98230 for a case where effect to the relief is given by the company in its original return because:

  • a loan is repaid, released or written off more than nine months after the end of the period, and
  • relief is due at the time that the return is submitted.

See Example 3 in CTM98230 for a case where relief is given under TMA70/SCH1A because:

  • a loan is repaid released or written off more than nine months after the end of the period, and
  • relief is not due at the time that the return is submitted, and
  • the company is out of time to amend its return to give effect to the claim.

See Example 4 in CTM98230 for a case where a claim made in a return for “the current accounting period” is treated as an amendment of the return and SA for the previous accounting period because the company is in time to amend that return.