Loans to participators

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Owner-Managed Businesses

Guidance

This guidance note deals with the rules regarding payment of tax, and making claims for repayment of tax on loans to participators.

For a summary of other tax implications of close company status, see the Close companies ― overview guidance note.

Making of loans to participators

For loans or advances made by a close company, a tax charge of 33.75% (32.5% before 2022/23) will apply if the loan was made otherwise than in the ordinary course of a business carried on by it, which includes the lending of money to any of the following:

•
a person who is a ‘participator’ in the company or is an ‘associate’ of a participator
•
a trust in which a participator or their associate is trustee or potential beneficiary, or
•
an LLP or other partnership whose membership includes a participator or their associate ― this will catch, for instance, genuine commercial structures such as loans from related close companies to property development LLPs to fund new developments

FA 2022, s 4

‘Participator’ is defined in the Definition

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