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HMRC internal manual

Debt Management and Banking Manual

From
HM Revenue & Customs
Updated
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Interest: Interest Review Unit (IRU): Corporation Tax (CT): Section 419 ICTA 1988 assessing

Where a close company makes a loan or advance to a participator (or associate of theparticipator), an assessment will be made to claim the tax on the loan as if it were acharge to CT on the company.

Where the loan or advance is;

  • repaid; or
  • a company releases or writes off the whole or part of the loan on or after 6 April 1999,

the company can claim relief from the tax (in CTSA by including the claim in the self-assessment). The relief will be applied by cancelling or repaying the correct amounts.Relief is given in line with ‘Section 419(4’) and interest is charged from the relevantdue date to the earlier of the date the tax was paid or the date(s) the loan or advancewas repaid (or written off).

Section 419 Assessing to 1 July 1999

For a CT accounting period ending before 1 July 1999, the assessment would be made as astand-alone assessment under the Corporation Tax Assessing (CTA) provisions.

For interest charging purposes the due dates are shown below:

Accounting periods ending Due date
   
on or before 30 September 1993 14 days after the notice of assessment is sent
on or after 1 October 1993 and before 30 March 1996 14 days after the end of the AP
on or after 31 March 1996 and before 1 July 1999 Nine months and one day after the end of the AP (that is, the same as for mainstream CT).

Section 419 Assessing from 1 July 1999

For a CT accounting period ending on or after 1 July 1999, the company includes any taxdue under ‘S419 ICTA 1988’ in the self-assessment return and it is shown as a specialentry in the COTAX record.

For interest charging purposes the due date is:

  • nine months and one day after the end of the AP (that is, the same as for mainstream CT).

Payment and deemed payment dates

In both cases the interest is charged until the earlier of:

  • the date the tax is paid; or
  • the date the loan is repaid, released or written off ending the need for tax to be paid.

An objection may be received because the due date or the ‘Deemed Payment Date’ used inthe calculation of the interest is incorrect. Consult with the local office to confirmthat the dates used are correct. A known problem is that the repayment of the loan is donein instalments but the office only uses the date of the last instalment that completes therepayment. For charging interest the date and amount of each instalment is needed, notjust the date of completion.

Uphold interest where the correct dates have been used. Where the local office confirmsincorrect dates have been used, authorise the correct local office to recalculate theinterest using the correct dates and cancel the excess interest.

You can get more information in the COTAX Manual (COM); Claims/Reliefs; Other Relief S419ICTA 88-Late Payment Interest’ and the Company Tax Manual (CTM) CT61505-61790