CH 21 - Close Company Implications - Further Facts

Question 1

Which loans are excluded from CTA 2010, s.455?

Answer 1

• • Loans made in the ordinary course of business of the company.
• • The supply of goods or services in the ordinary course of the trade unless the credit period is longer than normal.
• • Loans to trustees of charitable trusts where the loan is applied for the purposes of the charitable trust only.
• • Loans of no more than £15,000 made to a full-time director or employee who is entitled to no more than 5% of the ordinary share capital and no more than 5% of the company’s assets on a winding up.

Question 2

What are tax consequences for BENEFITS TO PARTICIPATORS for company & employee = participator?

Answer 2

Company will;
* - get tax relief for cost of providing benefit and Class 1A NIC payable
* - Class 1A NIC payable on employment income value of benefit

Participator = employee will;
* - taxed on benefit as part of employment income

Question 3

What are tax consequences for BENEFITS to NON-Employee participator?

Answer 3

Company will;
- get no tax relief for cost of providing benefit

Participator will;
- be taxed on benefit as dividend received

Question 4

What is Close Investment Holding Company?

Answer 4

Every close company unless exist wholly or mainly for one of the permitted purposes as per CTA 2010, s.18N

Otherwise, cannot use the standard small profits and marginal rates of tax, but is charged corporation tax at the main rate (25%).

Question 5

How is taxed income from jointly held shares in close companies?

Answer 5

The income from jointly held shares in close companies will be taxed according to the actual ownership of each spouse or civil partner.

(ITA 2007, s.836)