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Bed and breakfasting of loans / benefits to participators

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance

Bed and breakfasting of loans / benefits to participators

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance
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Historically the close company rules had been manipulated to avoid the charges on the company and the participator. This had been achieved fairly simply in that a loan to a participator was repaid shortly before the date on which the close company charge became due, only for the same or a similar amount to be loaned again to the same participator in the following accounting period.

In order to prevent this abuse, anti-avoidance legislation exists to deny relief where loans (and prior to 30 October 2024, benefits) were β€˜bed and breakfasted’ in this manner. Consequently, the relief is only available if the repayment / return payment is β€˜permanent’.

The rules apply where either:

  1. β€’

    within a 30-day period a participator has made repayments in excess of Β£5,000 and in a subsequent accounting period, new loans or (prior to 30 October 2024) benefits in excess of Β£5,000 are made to the same person or their associate

  2. β€’

    where the total amount of a participator’s loan or (prior to 30 October 2024) benefit exceeds

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