Loans to directors and participators

[Paula Henderson]

I know that if a company makes a loan to a participator the s455 tax is due.
If the loan is interest free, then if the participator is also a director there is also a beneficial loan interest charge on him. However, if the participator is not a director then is there any beneficial loan interest charge?

[LozaACCS]

There cannot be a BIK if the participator is not an employee so it cannot be taxed as employment income.
The cash value of the benefit is instead treated as a net dividend (S1064 CTA 2010)
The exclusion from the IT charge is at S189 (1)(b) ITEPA 2003

[Paula Henderson]

I am assuming that the loan itself is not written off, then the loan is not treated as a dividend?

[LozaACCS]

If the loan is not written off;
Calculate the benefit as if the participator were an employee.
This amount is then treated as a net dividend (S1064(3) CTA 2010).
If the loan is written off the amount outstanding is again treated as a net dividend (S415 ITTOIA 2005)
There may be a liability to C1 NI on any amounts written off (S3(1) SSCBA 1992)
The above assumes that the company is a close company