Sarah Bradford looks at the special tax rules that apply where a close company makes a loan to a director.
In personal or family companies there is a close relationship between the directors and shareholders and the company, with money flowing between the directors and the company and vice versa. As a result, the lines between the financial affairs of the company and those of the individuals who own and run it may become blurred.
To counter possible tax avoidance that may arise as a result, special tax rules exist to deal with loans made by close companies to directors and participators.
What is a close company?
A close company is defined as (CTA 2010, s 439):
- a company which is under the control of five or fewer participators or
