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Historically the close company rules had been manipulated to avoid the charges on the company and the participator. This had been achieved fairly simply in that a loan to a participator was repaid shortly before the date on which the close company charge became due, only for the same or a similar amount to be loaned again to the same participator in the following accounting period.

In order to prevent this abuse, anti-avoidance legislation exists to deny relief where loans (and benefits) were ‘bed and breakfasted’ in this manner. Consequently, the relief is only available if the repayment / return payment is ‘permanent’.

The rules apply where either:

1. •

   within a 30-day period a participator has made repayments in excess of £5,000 and in a subsequent accounting period, new loans / benefits in excess of £5,000 are made to the same person or their associate

2. •

   where the total amount of a participator’s loan / benefit exceeds