When a close company makes a loan to a participator, most commonly a shareholder, a corporation tax charge can arise if the loan is not repaid within the required timeframe. This is often referred to as a Section 455 or s.455 tax charge.
For loans advanced on or after 6 April 2026, the s.455 tax rate increased to 35.75%, up from the previous rate of 33.75%.
The charge applies where the loan remains outstanding nine months and one day after the end of the company’s accounting period.
However, relief from the s.455 charge can usually be claimed where the loan is:
• repaid
• released
• written off
within that nine month period.
It is important to note that relief cannot be claimed for anticipated future repayments. In practice, this means participators should ensure any outstanding loan balances are cleared before the corporation tax return is submitted wherever possible.
If repayments are made after the return has already been filed, the company may still be able to recover the tax by submitting an amended corporation tax return or making a later claim to HMRC.
For many owner managed businesses, directors’ loan accounts can build up gradually over time, particularly where funds are withdrawn informally throughout the year. Monitoring balances regularly can help avoid unexpected corporation tax charges and cash flow issues.
At A&C Chartered Accountants, we help businesses review participator loan accounts proactively so potential s.455 issues can be identified early and managed efficiently.