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HMRC internal manual

Employment Income Manual

Particular benefits: loans written off: loans made by close companies

Sections 455 CTA 2010 and 415 ITTOIA 2005

A close company is chargeable to tax on any loans it makes to a director or an employee who is a participator (or an associate of a participator) under section 455 CTA 2010.

If a loan which is chargeable under section 455 is released or written off either wholly or in part, the borrower’s total income is normally treated under section 415 ITTOIA 2005 as if it were increased by the amount released or written off, grossed up at the Savings and Investment Income ordinary rate of tax as applicable to dividends and other distributions (see CTM61630).

If the write-off of the loan is chargeable potentially under both section 415 ITTOIA and section 188 ITEPA, the charge under section 415 takes priority over section 188 (EIM26116). Do not treat any amount released or written off which has been treated as the borrower’s income under section 415 as also chargeable under section 188(1) ITEPA 2003.