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Readers' forum: Winding it up

15 August 2017
Issue: 4612 / Categories: Forum & Feedback

Must a director’s loan be repaid before a tax claim under CTA 2010, s 455?

We act for a company that has been trading for many years. About five years ago the sole shareholder and director withdrew £500 000 to purchase his home and the amount has been left outstanding on a director’s loan account ever since. Each year he has made good the interest on the loan account. The company paid tax on the loan account under CTA 2010 s 455.

The company has recently ceased trading and there is no need for its continued existence. The balance sheet shows total reserves of £1.5m which is represented by the loan account the s 455 tax shown as recoverable and cash. The company will be wound up using a formal liquidation so that the gain made will be taxed as a capital receipt in the hands of the shareholder.

Unfortunately the shareholder does not have funds...

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