There is a change in the taxation of loans made by companies to company shareholders, otherwise known as loans to participators or beneficial loans.
When a company makes a loan to a participator and that loan still remains outstanding nine months after the year-end, the company has to pay (potentially refundable) s.455 tax on the balance of the loan, currently at the rate of 25%, which mirrors the position on the taxation of dividends.
It was announced in the 2016 Spring Budget that the dividend upper rate is to change to 32.5% from 6 April 2016 and that this will also affect the taxation of loans to participators, the rate for which will change from 25% to 32.5%.
As far as loans to participators are concerned, the HMRC Policy paper issued on 16 March 2016 indicates that the 32.5% rate for s.455 tax will apply to new loans made from 6 April 2016 onwards and that the old rate of 25% will still apply for old loans. However, we will not have final confirmation of this until the Finance Bill and Finance Act are issued, so we cannot be sure of the final position.
In any event, it seems clear that any new loans made to a shareholder by a company from 6 April 2016 onwards will attract s.455 tax at the 32.5% rate.
We will be keeping a close eye on developments but in the meantime if you have any questions please contact me.