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Oct 2, 2024 · The charge is 33.75% of the loan amount, payable by the company. However, it’s a temporary tax that is refundable when the loan is repaid. For example, if a company lends £10,000 to a shareholder, it would need to pay £3,375 in Section 455 tax. Section 455 comes into effect in several scenarios: Direct loans from the company to a shareholder
- If the loan was more than £10,000 (£5,000 in 2013-14)
- If you paid interest below the official rate
- Reclaim Corporation Tax
If you’re a shareholder and director and you owe your company more than £10,000 (£5,000 in 2013 to 2014) at any time in the year, your company must:
•treat the loan as a ‘benefit in kind’
•deduct Class 1 National Insurance
You must report the loan on a personal Self Assessment tax return. You may have to pay tax on the loan at the official rate of interest.
If you’re a shareholder and director, your company must:
•record interest you pay below the official rate as company income
•treat the discounted interest as a ‘benefit in kind’
You must report the interest on a personal Self Assessment tax return. You may have to pay tax on the difference between the official rate and the rate you paid.
Your company can reclaim the Corporation Tax it pays on a director’s loan that’s been repaid, written off or released. You cannot reclaim any interest paid on the Corporation Tax.
Claim after the relief is due - this is 9 months and 1 day after the end of the Corporation Tax accounting period when the loan was repaid, written off or released. You will not be repaid before this.
If all the loans remain outstanding at 1 March 2024, the company will need to pay section 455 tax on the loan of £5,000. The full amount of that loan is within the charge, not just the excess over £5,000. Where the loan balance outstanding exceeds £10,000 at any point in the tax year, a benefit-in-kind tax charge will also arise.
The purpose of s455 tax. The s455 tax was introduced to deter companies from advancing their directors’ interest-free loans without a set timeframe for repayment. Essentially, it’s a mechanism to discourage the use of company funds for personal purposes without incurring tax obligations. However, the purpose of the s455 tax extends beyond ...
Sep 17, 2024 · The S455 tax rate is 33.75% of the loan’s value which is outstanding once it hits the 9 month and 1 day cut-off point. It’s charged at the higher rate of dividend tax, treating it as though you were paid in dividends rather than given a loan. For example, a £20,000 loan that hadn’t been repaid would incur an additional £6,750 in S455 tax.
Aug 12, 2024 · 1. Increase in the S455 Tax Rate. One of the most significant updates is the increase in the S455 tax rate, which has risen from 32.5% to 33.75% for loans made on or after 6 April 2022. This adjustment aligns the S455 tax rate with the upper dividend tax rate, ensuring consistency across the tax system.
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Apr 29, 2024 · Introduction to Section 455 TaxIn the UK, s455 tax, part of the Corporation Tax Act 2010, is designed to prevent tax avoidance through loans made by close companies to their participators, such as shareholders or directors. Essentially, it taxes loans made to shareholders or associated individuals when these loans are not repaid within a specified time frame. This tax acts as a deterrent ...
