½Û×ÓÊÓÆµ

Close companies ― overview

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

Close companies ― overview

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

Meaning of close company

The tax rules for close companies are intended to address those companies that are closely controlled (ie by the owners and their families) and therefore could be used to manipulate the tax position of its activities and its investors. Therefore, broadly speaking, most owner-managed or private family businesses will be close, but in many cases close company status may not be immediately apparent.

For further details, see the Definition of a close company guidance note or alternatively the Close company definition video.

Implications of close company status

The main implications of close company status are as follows:

  1. •

    a penalty tax at a rate of 33.75% on the amount of any loans to the company’s ‘participators’ (broadly its shareholders)

  2. •

    a tax charge at a rate of 33.75% on the cash equivalent of benefits provided to ‘participators’, where these are not already taxed as earnings

  3. •

    where interest is due from a close company to a ‘participator’, there are special rules regarding the timing of corporation tax relief for the interest ― see

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, and tax research, register for a free trial of Tolley+â„¢
Powered by

Popular Articles

Transferable tax allowance (also known as the marriage allowance)

Transferable tax allowance (also known as the marriage allowance)What is the transferable tax allowance (marriage allowance)?From 6 April 2015, an individual can elect to transfer 10% of the personal allowance (£1,260) to the spouse or civil partner where neither party is a higher rate or additional

14 Jul 2020 13:52 | Produced by Tolley Read more Read more

Gifts with reservation ― overview

Gifts with reservation ― overviewIntroductionA gift with reservation (GWR) arises when an individual ostensibly makes a gift of his property to another person but retains for himself some or all of the benefit of owning the property. The legislation defines a gift with reservation with reference to

14 Jul 2020 11:48 | Produced by Tolley Read more Read more

Interest and penalties on late paid tax under self assessment

Interest and penalties on late paid tax under self assessmentInterestIf the capital gains tax, the balancing payment or payments on account of tax and / or Class 4 national insurance contributions (NIC) are paid late, HMRC will charge interest on the amount overdue from the original due date. The

14 Jul 2020 12:00 | Produced by Tolley Read more Read more