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HMRC internal manual

Employment Income Manual

Pt 7A ITEPA 2003: FA 2017 amendments: double taxation - interaction with section 455 CTA 2010 or section 415 ITTOIA 2005 – 2019 loan charge

F (No 2) A 2017 – Schedule 11 – Paragraph 36A

Where the provisions of the loan charge apply because a person is treated as taking a relevant step by reason of a loan made to a relevant person, double taxation can occur if the relevant step also gives rise to a charge under the loans to participators provisions in section 455 CTA 2010.

It is not the intention to tax income twice so paragraph 36A Sch 11 F (No 2) A 2017 provides an exemption from charge under Pt 7A where such a charge arises and is paid or reported to HMRC before the loan charge arises. It is possible however that such a charge may exist but not be due on the date the loan charge would arise. In this case the date on which the loan charge relevant step is treated as taken may be altered.

Where the relevant step gives rise to a charge under section 455 CTA 2010, the charge needs to meet one of two conditions in order to take priority over and therefore avoid any Pt 7A charge.

The first condition is known as the payment condition and is defined in paragraph 36A(6) Sch 11 F (No 2) A 2017. This requires the net section 455 charge to either be nil or to have been paid in full on or before what is described as the key date. This is the later of the date on which the tax due under that section is due and payable or 5 April 2019.

The net section 455 charge is the amount of the charge under that section less any relief due under section 458 CTA 2010. This relief relates to repayments made in respect of the loan, or the release or writing off of the loan, occurring on or before the due date, for which a claim has been made on or before the key date.

The second condition is detailed in paragraph 36A(5). This requires the charge to have been reported in one of the employer’s company tax returns, but for the payment condition to have not been met. For this condition to be met, an officer of HMRC must consider that a charge under Chapter 2 of Pt 7A should not apply in the case of the relevant step concerned.

Where neither of the exceptions in paragraph 36A(5) or (6) apply, the relevant third person is treated as taking the relevant step immediately before the end of the key date.