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HMRC internal manual

Enquiry Manual

Close Companies: Settlement: Extractions Treated as Loans - The Offer

Company contract offers that include S455 liability should be drawn up using as a template the EMapp1 draft number 10 (lump sum) or 11 (instalment) modified for the requirements of your case as follows:

  1. The gross S455 liability before any relief already due under S458(1) to (3) or deferred under S458(4) and (5) should be included as unpaid duties and shown separately in the table of unpaid duties.
  2. Only participators whose loan accounts still have debit balances should be joined in the offer unless a joint and several offer is desirable because of possible means problems EM8730+. Participators joined in the offer should sign the letter in their own right, whether or not they also signed as officers of the company.
  3. Where forward interest is included for S458 relief deferred under S458(5) or for “contingent” relief EM8642 insert the words ‘and for the time granted’ in the draft 10 offer after ‘for the penalties and interest on it/them’.
  4. The amount to be offered is the gross amount before any relief due or which will become due under S458.
  5. Relief due under S458 not deferred by S458(5) at the time the offer is made is given in the offer as an amount
£x to be satisfied by relief already due under Section 458 Corporation Tax Act 2010.
  1. Relief under S458 deferred under S458(5) at the time the offer is made is allowed in the offer as an amount
£x to be satisfied by the set off of £x relief due under Section 458 Corporation Tax Act 2010 on dd/mm/yyyy.
  1. Relief under S458 that you are prepared to accept will become due contingent upon the company being reimbursed or the loan written off after the offer is made should be incorporated in the offer as a payment (or payments)
£x to be paid on or before ………, provided that the said £x shall not be payable, then or at all, if, before the date on which the payment becomes due, the Inspector has received a claim under Section 458 Corporation Tax Act 2010 and agreed relief from an amount of tax equal to the amount of the said £x. 
  1. The dates fixed for payment of contingent instalments should allow sufficient time for the Section 458 claim to be made and allowed and if Section 458(5) applies, the date for payment must not be fixed before relief under Section 458 is due.

If you have difficulty applying the guidance for contract settlements involving S455 liability in a particular case or in drafting an appropriate offer letter you can telephone contact link for advice.