SolvedCTM61750 | Close companies: loans to participators: treating loan as made by another company
From HM Revenue & Customs · Company Taxation Manual
Where CTA10/S460 applies, a loan made by one company is to be treated as made by another company.
CTA10/S455 and ITTOIA05/S415 raise a number of questions that have to be asked of the company that ‘made the loan’. The company which made the loan is the company that:
actually made the loan or advance, or
on the incurring or assigning of a debt, is regarded as having made a loan (CTA10/S455 (4)).
The provisions of CTA10/S455 (4) are extended to companies that are not close by CTA10/S460 (7). For example, where a debt is assigned to a non-resident company controlled by a close company, the debt is firstly treated by CTA10/S455 (4) and CTA10/460 (7) as a loan made by the non-resident company. It may then be treated by CTA10/S460 (1) as a loan made by the close company. In this case, the questions have to be asked with regard to the non-resident company.
The questions to ask are whether:
the company making the loan did so otherwise than in the ordinary course of a business carried on by it which includes the lending of money
the loan or any part of it has been repaid to the company
the company has released or written off the whole or part of the debt in respect of the loan