Readers’ forum: Loan to participators

Jake is the sole shareholder of TradeCo a UK trading company. He and Rebecca are the only directors and they with seven other individuals are full-time employees of the company.

In its financial year to 31 December 2018 the company advanced a loan of £70 000 to Jake which remained outstanding as at 1 October 2019. This balance is understood to be subject to corporation tax at 32.5% under CTA 2010 s 455. A single extra loan of £8 000 was made in 2018 to Rebecca which also remains outstanding as at 1 October 2019.

If my understanding is correct if Rebecca – who owns no shares in the company – was completely unrelated to Jake it seems that the ‘loan to participators’ provisions would not apply at all – although benefits in kind should be considered. ...