The loans to participators rules impose a 25% tax charge on a close company in respect of any loan or advance made to a participator which is outstanding more than nine months after the accounting period in which it is made. The tax charge is generally refunded once the loan is repaid.
The consultation seeks views on a number of options for reform. These include:
- increasing the tax charge; and
- imposing a permanent annual (non-refundable) charge on loan amounts outstanding at the year end.
The consultation period ends on 2 October 2013. If reform proceeds, draft legislation is expected in the Autumn for inclusion in Finance Bill 2014.