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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 -examples

Example 1

  • Company A makes a loan to a participator in the accounting period ended 31 December 2000 and submits its return including the liability under ICTA88/S419 on 30 June 2001.
  • The participator repays the loan on 30 September 2001 (earlier than nine months and one day after the end of the accounting period in which it was made).
  • As the company is still in time to amend its return for the accounting period ending 31 December 2000 (time limit 31 December 2002) it gives effect to the claim by amending its the return.

Example 2

  • Company B makes a loan to a participator in the accounting period ended 31 December 2000 and submits its return late for that accounting period on 30 October 2002.
  • Company B includes the liability under Section 419 in the return.
  • The company receives repayment of the loan on 30 November 2001 (more than nine months after the end of the accounting period in which it was made).
  • Relief is deferred under Section 419 (4A) until 1 October 2002.
  • Company B can give effect to its claim to relief in the return and SA for the accounting period ended 31 December 2000 because:
    • the loan was made during that accounting period,

and

  • the relief is due at the time it makes the return.

 

Example 3

  • Company A makes a loan to a participator in the accounting period ended 31 December 2000 and submits its return in time, including the liability under Section 419 on 30 December 2001.
  • The company receives repayment of the loan on 31 January 2002 (during the accounting period ending 31 December 2002).
  • Section 419 (4A) defers the relief until 1 October 2003.
  • The company is in time to amend its return for accounting period ended 31 December 2000 up to 31 December 2002. However, it cannot give effect to the claim by doing so because the relief is not due until 1 October 2003.
  • TMA70/SCH1A applies to the claim and the company cannot receive the relief until 1 October 2003.

Example 4

  • Company A makes a return in time for the accounting period ended 31 December 2001 on 25 June 2002.
  • It includes a Section 419 (4) claim in respect of the repayment on 26 November 2001 of a loan made during the previous accounting period. Relief is deferred under Section 419(4A) until 1 October 2002, the due date of accounting period 31 December 2001.
  • As the loan was not made during the return period to 31 December 2001, the company cannot give effect to the Section 419 (4) relief in its return and SA for that period.
  • All the conditions of Section 419 (4B) are not met because Section 419 (4A) applies to the claim for the accounting period to 31 December 2000. When relief is due (after 1 October 2002) the provisions of TMA70/SCH1A apply instead and the claim is dealt with by repayment or discharge.

However if the return for 2001 was submitted on or after 1 October 2002, but before 31 December 2002, then FA98/SCH18/PARA57 and Section 419 (4B) apply together. Relief is available when the claim is made and it is still possible to amend the return for the accounting period to 31 December 2000. You can treat the claim as an amendment to the 2000 return, rather than applying Schedule 1A.