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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: directors: liaison - S175 ITEPA 2003/S419 ICTA 1988

You should

  • 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).