Income and Corporation Taxes Act 1988

423 Apportionment of certain income, deductions and interest

(1) Subject to section 424, there shall, for the purposes of this Chapter, be apportioned by the inspector among the participators in a close company—

(a) the income of the company for any accounting period; and

(b) as if it were the income of the company for an accounting period, any amount—

(i) which was deducted in respect of annual payments made by the company in arriving at its distributable income for that period, and

(ii) which in the case of an individual would not have been deductible or would (apart from section 683(3)) have been treated as his income in computing his total income; and

(c) as if it were the income of the company for an accounting period, any interest paid by the company in that period.

(2) Any amount apportionable under any paragraph of subsection (1) above shall be in addition to the amount (if any) which may be apportioned under any other provision of that subsection.

(3) Any amount apportioned to a close company under this section, or by one or more sub-apportionments under this subsection, shall be further apportioned among the participators in that company.

(4) If any amount of interest apportionable by virtue of paragraph (c) of subsection (1) above is interest paid to a participator in the close company or is (apart from that paragraph) treated for the purposes of income tax as the income of such a participator, the amount so apportionable to that participator shall be reduced by the first-mentioned amount (and without requiring the reduction to be reflected in the amount apportioned to any other person).

(5) In determining for the purposes of this Chapter the person to whom any amount is to be apportionable by virtue of subsection (1)(c) above, any interest which any person possesses as a loan creditor shall be disregarded (but without prejudice to the making of an apportionment to him in any other capacity).

(6) Subject to paragraph 10 of Schedule 19, this section shall, notwithstanding the winding up of a company, or the passing of any resolution or the making of any order or anything else done for the purpose of winding up a company, continue to apply as if the company were not being wound up.

(7) Schedule 19, which makes provision for determining the relevant income and distributions of a company for an accounting period and whether there is any such excess as is mentioned in section 424(1), shall have effect for the purpose of supplementing this Chapter.