HMRC internal manual

Employment Income Manual

EIM26500 - The benefits code: beneficial loans: interaction between employment income and other tax charges: loans from close companies: general

Particular care is needed when you are dealing with loans made by a close company. Broadly speaking a company is a close company if it is:

  • under the control of five or fewer participators and their associates, or
  • under the control of directors who are participators and their associates.

Loans made by a close company to a director or an employee who is a participator, or an associate of a participator, may be chargeable to tax under Section 419 ICTA 1988 on the company as well as there being a charge under Section 175 ITEPA 2003 on the individual.

If it appears that a loan has been made by the close company to a director or participator tell the Inspector dealing with the accounts. He or she can then check whether Section 455 CTA 2010 applies to it. A charge on the company under Section 455 does not replace any charge on the recipient for having the benefit of a beneficial loan.