HMRC stall on close company loans

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HMRC stalls on reform of close company loans

Plans to reform the rules governing the taxation of close company loans to their participators are still under review and, in the latest twist, HMRC has written to CIOT asking for further information about its concerns raised during last autumn’s consultation, Reform of close company loans to participators rules according to Harris & Co accountants Northampton

Close companies are those controlled, directly or indirectly, by five or fewer participators or by any number of directors who are participators. Participators are individuals who have shares or an interest in the company.

Following the consultation, which found that that the current regime was preferable to any wide reform, the government decided not to proceed with a fundamental reform of the regime, or to change its operational structure. Instead, it was decided that HMRC would continue to engage with interested parties with a view to making more targeted adjustments to the regime.

HMRC is now asking for further information on some concerns that were raised during the last consultation process, including any problems that may be caused by the amendments made in Finance Act 2013. They are asking for evidence in support of less fundamental adjustments to the regime, in particular, reform in the area of loans to partnerships (including LLPs), charities and EBTs.

The letter states that ‘a robust and supportable case will include a realistic approach to factors like how many companies are affected by the issues, whether reform to these rules is the best or only way to resolve any problems, or whether reforming the rules to solve a problem would cause difficulties elsewhere, potentially opening up further ways to exploit the rules/ avoidance [and] admin burden increases.’

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