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HMRC internal manual

Enquiry Manual

Close companies: settlement: extractions treated as loans

After the loan accounts for directors and/or participators have been rewritten EM8620+ the following principles should be used to compute the amounts to be included in the settlement in respect of S455 and/or S464A liabilities.

  1. The gross liability under S455 and S464A, without taking into account S458 or S464B relief, arising for each AP in the period covered by the enquiry should be recovered along with the interest thereon. The date from which interest arises has changed over the years and these are set out in the table below


Accounting Period in which loan or advance made Date from which interest arises
AP ending on or before 30/9/1993 From 1st day of FY following the FY in which loan was made (S88).
AP ending on 1/10/1993 to on or before 30/3/1996 From 14 days after the end of the AP in which loan was made (S87A).
AP ending on or after 31/3/1996 From 9 months + 1 day after end of the AP in which loan was made (S87A).
  1. Do not include S455 or S464A liability for a loan or advance made in an AP ended on or after 31 March 1996 that is repaid etc. earlier than 9 months and 1 day from the end of that AP.
  2. Penalties arise on the gross S455 and S464A liability included in the settlement.
  3. Any relief under S458 and S464B is given against the tax due for the AP in which the loan or advance was made. Relief does not reduce the amount of tax, interest and penalties recoverable but may reduce the amount to be paid EM8642.
  4. When one repayment etc. results in relief under S458 or S464B for more than one AP, the relief should be given on a first in, first out basis.

Where settlement is not by contract the necessary assessments and amendments should be made in accordance with the guidance in ADP for Companies and COM (Company Online Manual).