Autumn Statement 2015: Corporation tax – loans to participators and charitable trusts

Loans made by close companies to trustees of a settlement where the trustees or the beneficiaries of the trust are participators in the company may be liable to a charge under CTA 2010, s 455.

The government has recognised that some of the transactions being caught did not fit the policy rationale of the rules (because the funds could not end up in the hands of individuals for their personal use). Therefore a targeted exemption will be introduced removing the exposure to the s 455 charge for charities where it is clear that the loan or advance is being made for wholly charitable purposes. Charities will not have to account for any s 455 charge in respect of loans or advances made on or after 25 November 2015 subject to Royal Assent to Finance Bill 2016.

This long overdue announcement will remove an unwelcome cashflow disadvantage for charities, especially those which are structured in such a way that exposure to this charge has been unavoidable.