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Loans to participators

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

Loans to participators

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance
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This guidance note deals with the rules regarding payment of tax, and making claims for repayment of tax on loans to participators.

For a summary of other tax implications of close company status, see the Close companies ā€• overview guidance note.

Making of loans to participators

For loans or advances made by a close company, a tax charge of 33.75% will apply if the loan was made otherwise than in the ordinary course of a business carried on by it, which includes the lending of money to any of the following:

  1. ā€¢

    a person who is a ā€˜participatorā€™ in the company or is an ā€˜associateā€™ of a participator

  2. ā€¢

    a trust in which a participator or their associate is trustee or potential beneficiary, or

  3. ā€¢

    an LLP or other partnership whose membership includes a participator or their associate ā€• this will catch, for instance, genuine commercial structures such as loans from related close companies to property development LLPs to fund new developments

FA 2022, s 4

ā€˜Participatorā€™ is defined in the Definition of a close company guidance

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