EIM47260 - Pt 7A ITEPA 2003: CCG: double taxation - interaction with section 455 CTA 2010 or section 415 ITTOIA 2005

ITEPA 2003: sections 554Z2A

Where the provisions of the CCG apply to a relevant step under sections 554B, 554C or 554D, 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 or the release of loans to participators provisions in section 415 ITTOIA 2005.

It is not the intention to tax income twice so section 554Z2A provides an exemption from charge under Pt 7A.

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 section 554Z2A(2). This requires the net section 455 charge to either be nil or to have been paid in full on or before the due date i.e. the date on which the tax due under that section is due and payable.

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

The second condition is known as the consent condition. 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.