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Finance (No. 2) Bill
Schedule 28 — Close companies
Part 1 — Amendments of Part 10 of CTA 2010
Close companies
Amendments of Part 10 of CTA 2010
Part 10 of CTA 2010 (close companies) is amended as follows.
In section 438 (overview), after subsection (2) insert—
Chapter 3A imposes a charge to tax in connection with other
arrangements involving close companies and participators.
Chapter 3B restricts the relief available to close companies in
connection with loans, advances and other arrangements."
The amendment made by this paragraph is treated as having come into force
on 20 March 2013.
In section 455 (charge to tax in case of loan to participator), for subsection (1)
This section applies if a close company makes a loan or advances
money to—
a relevant person who is a participator in the company or an
associate of such a participator,
the trustees of a settlement one or more of the trustees or
actual or potential beneficiaries of which is a participator in
the company or an associate of such a participator, or
a limited liability partnership or other partnership one or
more of the partners in which is an individual who is—
a participator in the company, or
an associate of an individual who is such a
participator."
The amendment made by this paragraph has effect in relation to a loan or
advance made on or after 20 March 2013.
In section 459(2) (application of other provisions where loan treated as made
to participator), after "458" insert "and 464C and 464D".
After Chapter 3 insert—
"Chapter 3A
Charge to tax: other arrangements
Charge to tax: arrangements conferring benefit on participator
This section applies if—
a close company is at any time a party to tax avoidance
arrangements, and
as a result of those arrangements, a benefit is conferred
(whether directly or indirectly) on an individual who is—
an associate of such a participator.
But this section does not apply if, or to the extent that, the conferral
of the benefit gives rise to—
a charge to tax on the company under section 455, or
a charge to income tax on the participator or associate.
There is due from the company, as if it were an amount of
corporation tax chargeable on the company for the accounting
period in which the benefit is conferred on the participator or
associate, an amount equal to 25% of the value of the benefit
conferred.
Tax due under this section in relation to a benefit conferred on a
participator or associate is due and payable in accordance with
section 59D of TMA 1970 on the day following the end of the period
of 9 months from the end of the accounting period in which the
benefit was conferred.
If a company (C) controls another company (D), a participator in C is
to be treated for the purposes of this section as being also a
participator in D.
For the purposes of this section, arrangements are "tax avoidance
arrangements" if the main purpose, or one of the main purposes, of
the arrangements is—
to avoid or reduce, or obtain a relief or increased relief from,
to obtain a tax advantage for the participator or associate.
"arrangements" includes any arrangements, scheme or
understanding of any kind, whether or not legally
enforceable, involving a single transaction or two or more
transactions, and
"tax advantage" has the meaning given in section 1139, reading
references to tax in that section as references to income tax.
Relief in case of return payment to company
Subsection (2) applies if a benefit has been conferred which gave rise
to a charge to tax on the company under section 464A.
Relief is to be given from that tax, or a proportionate part of it, if—
a payment ("the return payment") is made to the company in
respect of the benefit, and
no consideration is given for the return payment.
Relief under this section is to be given on a claim, which must be
made within 4 years from the end of the financial year in which the
return payment is made to the company.
Subsection (5) applies if the return payment is made on or after the
day on which tax under section 464A becomes due and payable in
relation to the benefit.
Relief in respect of the return payment may not be given under this
section at any time before the end of the period of 9 months from the
end of the accounting period in which the return payment was made.
Schedule 1A to TMA 1970 (claims and elections not included in
return) applies to a claim for relief under this section unless—
the claim is included (by amendment or otherwise) in the
return for the period in which the benefit was conferred, and
the relief may be given at the time the claim is made."
The amendment made by this paragraph has effect in relation to
arrangements to which a close company becomes a party on or after 20
March 2013.
After Chapter 3A insert—
"Chapter 3B
Restriction on relief
Restriction on relief under sections 458 and 464B
Subsection (4) applies where, within any period of 30 days—
one or more repayments totalling £5,000 or more are made to
a close company in respect of one or more chargeable
payments made by the company to a person, and
one or more chargeable payments totalling £5,000 or more are
made by the company to the person or an associate of the
Subsection (4) also applies where—
immediately before a repayment is made, £15,000 or more is
owed to a close company in respect of one or more chargeable
payments made by the company to a person,
at any time after the repayment is made, the close company
makes a chargeable payment ("the new payment") to the
person or an associate of the person, and
the condition in subsection (3) is met.
The condition is that, at the time of the repayment—
any person intended that the new payment would be made,
arrangements had been made for the new payment to be
Where this section applies, relief is not to be given under section
458(2) or 464B(2) (or, if already given, is to be withdrawn) in respect
of whichever is the lower of the following amounts—
the amount repaid, and
the amount of—
in a case within subsection (1), the chargeable
payments mentioned in paragraph (b) of that
subsection, and
in a case within subsection (2), the new payment.
Subsection (4) does not apply in relation to a repayment which gives
rise to a charge to income tax on the participator or associate by
reference to whom the loan, advance or benefit was a chargeable
The Treasury may by order vary a sum specified in subsection (1) or
An order under subsection (6) may contain incidental, supplemental,
consequential and transitional provision and savings.
Section 464C: supplementary
All such assessments and adjustments of assessments are to be made
as are necessary to give effect to section 464C(4).
If a person who has made a tax return becomes aware that, after
making it, anything in it has become incorrect because of the
operation of section 464C(4), the person must give notice to an officer
of Revenue and Customs specifying how the return needs to be
amended.
The notice must be given within 3 months beginning with the day on
which the person became aware that anything in the return had
become incorrect because of the operation of section 464C(4).
In section 464C, "chargeable payment" means—
a loan or advance made by a close company which gives rise
to a charge to tax under section 455, or
the conferral of a benefit on an individual in circumstances
which give rise to a charge to tax under section 464A.
In a case within subsection (4)(b)—
the conferral of the benefit is to be treated for the purposes of
section 464C as a loan made by the close company to the
individual to the value of the benefit conferred, and
any payment in respect of which (apart from section 464C)
relief is due to the close company under section 464B is to be
treated for the purposes of section 464C as a repayment of the
loan."
The amendment made by this paragraph has effect in relation to repayments
and return payments made on or after 20 March 2013.
In section 465 (power to obtain information), after "Chapter 3" (in both
places) insert "or 3A".
Part 2 — Other amendments
Taxes Management Act 1970
TMA 1970 is amended as follows.
In section 59E(11)(a) (provision as to when tax is due and payable)—
after "455" insert "or 464A", and
after "loan" insert "or benefit".
In section 59F(6)(a) (arrangements for paying tax on behalf of group
members)—
Section 109 (corporation tax on close company in connection with loans to
participators etc) is amended as follows.
In subsection (1)—
after "459" insert "and 464A and 464B", and
for "by close companies" insert "or benefits".
For subsection (3) substitute—
For the purposes of section 87A of this Act as applied by subsection
(1) above—
the date when tax under section 455 of CTA 2010 became due
and payable is that determined in accordance with
subsection (3) of that section, and
the date when tax under section 464A of CTA 2010 became
due and payable is that determined in accordance with
subsection (4) of that section."
After subsection (3A) insert—
If there is a payment which for the purposes of section 464B of CTA
2010 is a return payment in respect of a benefit conferred, interest
under section 87A of this Act on so much of the tax under section
464A of CTA 2010 as is referable to the return payment is not payable
in respect of any period after the date on which the return payment
was made."
In subsection (4), after "458" insert "or 464B".
In subsection (5), after "459" insert "or 464A and 464B".
In the heading, after "loans" insert "or benefits".
The amendments made by paragraphs 9 to 11 are treated as having come
into force on 20 March 2013.
Finance Act 1998
Schedule 18 to FA 1998 (company tax returns, assessments and related
matters) is amended as follows.
In paragraph 1 (meaning of "tax"), after the entry relating to section 455 of
CTA 2010 insert—
"section 464A of that Act (tax on other benefit conferred on
participator),".
In paragraph 8(1) (calculation of tax payable), in paragraph 1 of the third
for "or advance made by close company" substitute ", advance or
In paragraph 18 (failure to deliver return: tax-related penalty), for sub-
paragraph (4) substitute—
In determining that amount no account is to be taken of—
any relief under section 458 of the Corporation Tax Act
2010 (relief in respect of repayment, etc of loan) which is
deferred under subsection (5) of that section, or
any relief under section 464B of that Act (relief in respect of
return payment) which is deferred under subsection (5) of
that section."
The amendments made by this paragraph are treated as having come into
force on 20 March 2013.
Income Tax (Trading and Other Income) Act 2005
In section 417 of ITTOIA 2005 (person liable for charge on release of loan or
advance), for subsection (1) substitute—
The person liable for any tax charged under this Chapter is—
in the case of a loan or advance made to a partnership, any
partner who is an individual, and
in any other case, the person to whom the loan or advance
If more than one person is liable in a case within subsection (1)(a), the
liability is to be apportioned between them in a just and reasonable
The amendment made by this paragraph has effect in relation to loans or
advances made on or after 20 March 2013.
Revised 28 March 2013