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HMRC internal manual

Enquiry Manual

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HM Revenue & Customs
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Close companies: settlement: giving CTA10/S458 and S464B relief in contract settlements

Entitlement to claim relief under S458 and S464B arises when the loan or advance is repaid etc or a return payment is made in respect of a benefit conferred.

If the loan or advance was made on or after 31 March 1996 (or the benefit was conferred on or after 20 March 2013) relief is deferred until 9 months and 1 day after the end of the AP in which repayment or return payment takes place by virtue of S458(4) & (5) or S464B(4) & (5).

When negotiating an offer you need to take into account

  • relief under S458 and S464B which is already due
  • relief which is deferred, and
  • relief which will become due if it is agreed to repay or write off the overdrawn loan account(s) as part of the settlement arrangements.

Interest under TMA70/S87A (TMA70/S88 for APs ending on or before 30/9/1993) arises from the normal due date to the date when repayment etc. takes place.

Where at the time an offer is made, relief under S458 and S464B is deferred by subsections (4) and (5), the S455 liability and S464A liability should strictly be paid by the company and then repaid when the relief falls due. However, rather than insist on payment, the S455 liability and S464A liability may be included in the offer as an instalment to be satisfied by the relief becoming due. As the company is effectively being given time to pay, forward interest EM6250 for the period from the date the company agrees to include the S455 liability and S464A liability in the offer up to the date relief becomes due should be included in the offer. Note in this connection

  • the forward interest should be calculated for the full period allowed, not for half the period as in EM6250 since this formula is only suitable when regular instalment payments progressively reduce the balance due
  • since statutory interest stops when the loan is repaid etc there will sometimes be a short gap before non statutory ‘forward’ interest starts to run.

Similarly, when the intention to repay or write off a loan or advance forms part of the settlement negotiations, forward interest should be included until payment of the “contingent” instalment is due. If Section 458(4) and (5) or section 464(4) and (5) apply, the date for payment must not be fixed before relief under Section 458 or Section 464 is due.

The contract offer should be drafted to include relief under S458 or S464B EM8646.