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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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CTSA: Loans to participators: CTPF - claims to relief

For loans made in accounting periods ending on or after 31 March 1996, ICTA88/S419 (4A) defers relief if repayment (or release or write-off, on or after 6 April 1999) of the loan occurs more than nine months after the end of the accounting period in which the loan was made. Some companies may submit a Section 419(4) claim before the relief is due. Relief is deferred until the due date for the accounting period in which the repayment, release or write-off takes place (see CTM61605 onwards). You need to be alert to this and ensure that relief is not given before it is due.

You must not give relief under Section 419(4) until it is due. A company has no right to apply for the postponement of tax charged in the assessment. You must not therefore accept any postponement application or informally stand over the tax.

Where a postponement application is made in conjunction with an appeal against an assessment under Section 419, you should write to the appellant explaining the implications of Section 419 (4A) and asking for the application to be withdrawn.

Whilst this approach to postponement applications may appear bureaucratic, in that we are pursuing payment of tax which we know will be discharged at a specific date in the future, current legislation provides that the amount remains due and payable until that future date is reached.

If we were to stand over the tax either formally or informally, we would be giving an unfair advantage to non compliant companies over those which have paid the tax due on time, but are denied a repayment because of Section 419(4A).

We are required to apply the legislation fairly, and therefore cannot make any exceptions, even on an informal basis. You are also reminded that if you find any evidence of “bed and breakfast” arrangements around the due date for payment of Section 419 tax, the guidance at EM2769 should be followed.

When giving relief under Section 419 (4) for loans made in an accounting period ending on or after 31 March 1996, you must follow the procedures at AC4814 onwards. Do not send the form CZ14 and the AC4816 report to the accounts office until relief under Section 419 (4) actually becomes due.