SEARCH, INDEX, UPDATES, CONTENTS, SERVICES, TAX PLANNING, SECTION 419
Sorry to use a technical term, but everyone who knows what Section 419 is refers to it as that. You can avoid it if you know how (and what it is).
It only affects participators or their associates in a close company, in other words small company shareholder directors, and only those participators who owe money to their company.
Many participators lend money to their company, and charge let the company pay personal bills as repayments of the loan. That is no problem unless the company makes more repayments than the balance of the loan, in which case the account is described as overdrawn, i.e. the participator owes money to the company.
If a participator withdraws profits from a company to which they are not entitled, the Exchequer does not receive its expected contribution. The withdrawal will often be in contravention of the Companies Act, but the Inland Revenue is concerned with the tax position.
Under Corporation Tax Self Assessment (CTSA) form CT600A has to report any balance remaining overdrawn 9 months after the Accounting Period End, but only if it has not been repaid. It is therefore important to make repayment within that period.
If there is an overdrawn balance which has not been repaid, 25% of the balance has to be remitted with the Return as tax. If the balance is subsequently repaid that tax is also repaid, but not for 12 months.
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