Supporting Guidance: employer compliance: guidance by subject: directors: liaison - S175 ITEPA 2003/S419 ICTA 1988
- check whether the S175 benefit on a beneficial loan (see EIM26101 onwards) has been correctly reported on form P11D.
If not you should always remember
- that loans by close companies to directors or overdrawn directors’ current accounts may be chargeable to tax under S419 ICTA 1988 on the company as well as there being a charge on the individual under S175 ITEPA 2003
- loans are not earnings for NIC unless they are written off or can be shown to be in anticipation of earnings
- if there is a tax charge on the individual, Class 1A NIC will be due from the company (see NIM12020) and
- never settle with directors personally before the affairs of the company have been considered by the CT caseworker.
In all S175 benefit cases you should
- report the findings to the CT caseworker on a Cross Tax Referral form, and
- avoid asking questions about records that are outside the scope of Regulation 97 to avoid prejudicing a paragraph 24 enquiry (the CT equivalent of Section 9A).