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HMRC internal manual

Enquiry Manual

Close Companies: Settlement: Loan Account Remains Overdrawn after Rewriting

If there is S455 liability which is not relieved you should ascertain whether the overdrawn balance on the loan account(s) will be reimbursed to the company. This may be done by voting dividends (if sufficient distributable profits exist) or by voting remuneration as well as by payment of funds or transfer of assets to the company. You should encourage the participators to reimburse the company before an offer is made, which allows the S458 relief to be given in the offer thereby reducing the balance to be paid.

Where the company will be reimbursed but not before the offer is made you can still include the S458 relief in the offer on a contingent basis provided a realistic proposal, with specific dates and amounts, is made. The participators can be allowed a reasonable time to provide (or raise) the money and you should calculate the amount of relief under Section 458 that will arise from the proposed reimbursement. You should compute interest on the deferred and contingent relief EM8642 and draw up the offer as in EM8646.

If there is no present intention to reimburse the company or proposals are not acceptable, potential future S458 relief should not be included in the offer and interest on the S455 liability should be computed up to the expected date of settlement as normal and the offer drawn up EM8646.