Corporation Tax Act 2010

463 Taxation of debtor on release of loan to trustees of settlement which has ended

(1) This section applies if each of conditions A to D is met.

(2) Condition A is that a company (X) is or was chargeable to tax under section 455 (charge to tax in the case of loan to participator) in respect of a loan or advance made to the trustees of a settlement.

(3) Condition B is that X releases or writes off the whole or part of the debt in respect of the loan or advance.

(4) Condition C is that the person from which the debt was due at the time of the release or writing off is a company (Y).

(5) Condition D is that the release or writing off takes place after the settlement has ended.

(6) When the release or writing off takes place, Y is treated as receiving an amount to which the charge to corporation tax on income applies.

(7) The amount which Y is treated as receiving is equal to—

where—

• N is the amount released or written off, and

• R is a percentage rate equal to the dividend ordinary rate specified in section 8(1) of ITA 2007 for the tax year in which the release or writing off takes place.