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Finance Act 2018

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Double taxationE+W+S+N.I.

3(1)In section 554Z2 of ITEPA 2003 (value of relevant step to count as employment income), after subsection (1) insert—E+W+S+N.I.

(1AA)But subsection (1) is subject to section 554Z2A (close companies).

(2)After section 554Z2 of ITEPA 2003, insert—

554Z2AException to section 554Z2(1): close companies

(1)Section 554Z2(1) does not apply in the case of a relevant step if—

(a)this Chapter applies in the case of the relevant step only by reason of section 554AA (close companies),

(b)the relevant step is a step within section 554B, 554C or 554D,

(c)the relevant step gives rise to a charge to tax under either—

(i)section 455 of CTA 2010 by virtue of section 459 of that Act (loans treated as made to participator), or

(ii)section 415 of ITTOIA 2005 (release of loan to participator in a close company), and

(d)in a case within paragraph (c)(i), either the payment condition or the consent condition is met in relation to the charge under section 455 of CTA 2010.

(2)The payment condition is met in relation to a charge to tax under section 455 of CTA 2010 if—

(a)the net section 455 charge is paid in full on or before the due date, or

(b)the net section 455 charge is nil.

(3)The “net section 455 charge” means the amount of the charge to tax under section 455 of CTA 2010 less the amount of section 458 relief from that charge.

(4)In subsection (3) “section 458 relief” means relief given under section 458 of that Act—

(a)in respect of a repayment made, or a release or writing-off occurring, on or before the due date, and

(b)on a claim made on or before the due date.

(5)The consent condition is met in relation to a charge to tax under section 455 of CTA 2010 if—

(a)the charge to tax is reported, in a company tax return of B's, as required under Schedule 18 to FA 1998 (company tax returns etc),

(b)the payment condition is not met in relation to that charge, and

(c)an officer of Revenue and Customs considers that section 554Z2(1) should not apply in the case of the relevant step concerned.

(6)In this section, references to the “due date” in relation to a charge to tax under section 455 of CTA 2010 are references to the day on which the tax is due and payable (see section 455(3) of CTA 2010).

4(1)Schedule 11 to F(No.2)A 2017 (employment income provided through third parties: loans etc outstanding on 5 April 2019) is amended as follows.E+W+S+N.I.

(2)Before paragraph 37 (but after the italic heading preceding that paragraph) insert—

36A(1)Sub-paragraphs (2) to (8) apply if—

(a)a person (“P”) would, apart from this paragraph, be treated as taking a relevant step by paragraph 1 by reason of a loan made to a relevant person, and

(b)the loan gives rise to a charge to tax under section 455 of CTA 2010 by virtue of section 459 of that Act (loans treated as made to participators).

(2)In this paragraph “the key date” means the later of—

(a)5 April 2019, and

(b)the day on which the tax referred to in sub-paragraph (1)(b) is due and payable (see section 455(3) of CTA 2010).

(3)Paragraph 1(2) has effect as if it treated P as taking the relevant step immediately before the end of the key date, but this is subject to sub-paragraphs (4) and (5).

(4)Paragraph 1(1) does not apply in the case of the loan if the payment condition is met.

(5)Paragraph 1(1) does not apply in the case of the loan if—

(a)the payment condition is not met,

(b)the charge to tax mentioned in sub-paragraph (1)(b) is reported, in a company tax return of B's, as required under Schedule 18 to FA 1998 (company tax returns etc), and

(c)an officer of Revenue and Customs considers that paragraph 1(1) should not apply in the case of the loan.

(6)The payment condition is met if—

(a)the net section 455 charge is paid in full on or before the key date, or

(b)the net section 455 charge is nil.

(7)The “net section 455 charge” is the amount of the tax referred to sub-paragraph (1)(b) less the amount of section 458 relief from that tax.

(8)In sub-paragraph (7) “section 458 relief” means relief given under section 458 of CTA 2010—

(a)in respect of a repayment made, or a release or writing-off occurring, on or before the key date, and

(b)on a claim made on or before the key date.

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