PART XI U.K. CLOSE COMPANIES

CHAPTER II U.K. CHARGES TO TAX IN CONNECTION WITH LOANS

Modifications etc. (not altering text)

C1 See 1989 s.107and Sch.12—close companies: administrative provisions.

421 Taxation of borrower when loan under section 419 released etc U.K.

(1) Subject to the following provisions of this section, where a company is assessed or liable to be assessed under section 419 in respect of a loan or [F1 advance made to the trustees of a trust and after the trust has ended] releases or writes off the whole or part of the debt in respect of it, then—

(a) for the purpose of computing [F2 the income of the person from whom the debt was due (“the debtor”) for corporation tax purposes], a sum equal to the amount so released or written off shall be treated as income received by [F3 the debtor] after deduction of income tax [F4 at the [F5 [F6 dividend] ordinary rate]] from a corresponding gross amount;

(b) no repayment of income tax shall be made in respect of that income and [F7 the debtor shall not be liable to pay corporation tax at the dividend] ordinary rate on that income;

(c) F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) F8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) F9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) F9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) This section shall be construed as one with section 419.

Textual Amendments

F1 Words in s. 421(1) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 174(2)(a) (with Sch. 2)

F2 Words in s. 421(1)(a) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 174(2)(b) (with Sch. 2)

F3 Words in s. 421(1)(a) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 174(2)(b) (with Sch. 2)

F4 Words in s. 421(1)(a) inserted (27.7.1993 with effect for the year 1993-94 and subsequent years of assessment) by 1993 c. 34, s. 77(4)(a)(5)

F5 Words in s. 421(1)(a)(b) substituted (with effect in accordance with Sch. 4 para. 11(2) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 4 para. 11(1)(a)

F6 Words in s. 421(1)(a) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 174(2)(b) (with Sch. 2)

F7 Words in s. 421(1)(b) substituted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 174(2)(c) (with Sch. 2)

F8 S. 421(1)(c)(d) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 174(2)(d), Sch. 3 (with Sch. 2)

F9 S. 421(2)(3) repealed (6.4.2005 with effect in accordance with s. 883(1) of the repealing Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 174(3), Sch. 3 (with Sch. 2)