CT600A Loans to participators by close companies

CT600A Tax Return Form for Loans to participators by close companies

Where in a period, a loan has been made to a participator in a close company and the loan has not been repaid in the period, Company needs to complete and supplementary form CT600A Loans to participators by close companies.

A close company is broadly a company:

  • Which is under the control of five or fewer participators, or
  • Any number of participators if those participators are directors, or
  • More than half the assets of which would be distributed to five or fewer participators, or to participators who are directors, in the event of the winding up of the company.

A participator is any person having a share or interest in the capital or income of the company.

A 'close company' is one which is under the control of five or fewer participators, or of any number of participators who are directors (S439 CTA 2010, previously S414 ICTA 1988). A 'loan' within S455 CTA 2010 includes the situation where a participator incurs a debt to the close company (S455(4)(a) CTA 2010, previously S419(2)(a) ICTA 1988), for example by overdrawing a current or loan account.

There are two exceptions where S455 CTA 2010 does not apply.

  • A debt incurred for the supply by the close company of goods or services in the ordinary course of its trade or business, unless the credit given exceeds six months, or is longer than that normally given to the company's customers (S456(2), previously S420(1) ICTA 1988).
  • Certain loans made to full-time working directors or employees who do not have a material interest in the close company (S456(3) CTA 2010, previously S420(2) ICTA 1988).

An 'associate' of a participator includes any relative or partner of the participator and the trustees of any settlement of which the participator or their relative is, or was, a settlor(S448 CTA 2010, previously S417(3)(a) and (b) ICTA 1988). Methods by which a loan can be 'repaid' include depositing money into the company's bank account, crediting the participator's current or loan account with a dividend, director's remuneration or bonus, or book entry.

The term 'release' refers to a formal procedure that normally takes place under seal for a consideration, whereas 'write off' is a wider term that does not necessarily require formal arrangements and could include acceptance by the company that the loan will not be recovered and has given up attempts to recover it.