S455 (S419) loans to participators

by **Ian Wright** on Thu Nov 24, 2011 2:59 pm

My client (A) has a UK trading company (B) with lots of surplus cash. (A) also has a non resident reading company (C) in Denmark.

(A) would like the the UK company(B) to loan money to non resident company(C) at a commercial rate of interest.

The Danish company is involved with forestry in Denmark and would use the cash for the purposes of its trade.

Could S455 CTA 2010 (S419 ICTA 1988) be applied because of this loan?

Ian Wright

by **tom 7000** on Fri Nov 25, 2011 7:22 pm

no

- it is a company isnt it? not a self employed or p/ship arrangement

by **Incredulum** on Fri Nov 25, 2011 8:11 pm

s455(6). A relevant person is (a) an individual or (b) a company receiving a loan or advance in a fiduciary or representative fashion.

Assuming you fall outside (b) then you will only be within s455 CTA 10 if or when the Danishco makes a loan to the individual (or indeed a company within (b)).

There is further anti-avoidance in 459 and 460 but presumably you do not fall into this?

by **Ian Wright** on Mon Nov 28, 2011 5:56 pm

Thank you very much gentlemen.

I did check the legislation and as Incredulum says a company can only be treated as an individual if it takes the loan in a fiduciary capacity like in advancing the cash through the foreign company outside of UK jurisdiction. That makes sense in order to capture using an offshore Co to provide loans without triggering S455 CTA 10.

You will be unsurprised to know that before I got the verification from you guys that the client told me he had already made the loan and then asked if that has been ok. Thank heavens since it is for £500k! Commercial rates will apply!

On another note it is a small company and outside Transfer Pricing rules which is helpful too.

Ian