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If you have an overdrawn loan account with your company, there is a tax charge on the company unless the loan is cleared within 9 months of the end of the period to which accounts are prepared. Nasty anti-avoidance measures have been introduced to stop companies avoiding the tax charge. In particular when the loan is at least £15,000 and is repaid just before the 9 month deadline but with the intention of re-borrowing from the company, and that intention is carried out, the amount repaid is ignored. That results in a tax charge arising as if the loan had not been repaid in time.

This is likely to catch common arrangements where all withdrawals from the company are treated as debits to the director’s loan account and are then cleared before the 9 month limit by way of voting a dividend or salary.

Tagged in: Corporate Tax Tax
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At Budget 2013, the Government announced a review of the rules governing the taxation of corporate debt (loan relationships) and derivative contracts with the aim of redesigning them to be simpler, clearer and more resistant to tax avoidance; this consultation forms part of that process.

The Government invites comment on the proposals made and on their commercial and fiscal impact on businesses.

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Repayments due for an earlier accounting period

If you’re claiming a loss carry back that reduces your Corporation Tax liability for an earlier accounting period, please remember to complete the repayment for an earlier period box on the CT600 form. This will allow HM Revenue & Customs (HMRC) to process your claim and make any appropriate repayment to you. If you’ve previously given HMRC your bank account details to enable repayments by Bacs, please remember to update them if they change.

How to claim for a trading loss to be carried back

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Corporation Tax – Amendment to the Exchange Gains and Losses (Bringing into Account Gains and Losses) Regulations 2002 (PDF 99K) Technical note, which includes draft Regulations, Explanatory Note, Explanatory Memorandum, Tax Information and Impact Note. Comments or questions on this technical note should be sent by email to Richard Daniel by 2 July 2013.

Implementation of the UK-US Agreement: update HM Revenue & Customs (HMRC) has published regulations, a Tax Information and Impact Note and guidance.

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Provisions were published in the Finance Bill on 28 March to amend the qualifying conditions and allow clearer, more detailed, rules to be specified in secondary legislation following a public consultation. This consultation sets out proposals for those rules.

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The Foreign Account Tax Compliance Act (FATCA), which is part of the US Hiring Incentives to Restore Employment Act of 2010, aims to combat tax evasion by US tax residents using foreign accounts. It includes certain provisions on withholding taxes and requires financial institutions outside the US to pass information about their US customers to the US tax authorities, the Internal Revenue Services (IRS). Failure to meet these new reporting obligations would result in a 30 per cent withholding tax on the financial institutions.

Draft US regulations setting out the implementation details were published in February 2012.

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HM Revenue & Customs (HMRC) operates a Double Taxation Treaty Passport (DTTP) Scheme for overseas corporate lenders. The Scheme applies only to loans taken out on or after 1 September 2010.

From April 2013, the Scheme has been revised to improve the customer experience of its users and enhance the scheme’s effectiveness. The changes are based on operational lessons learnt since the Scheme’s inception and representations made by our customers.

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Another key date in the groundbreaking agreement between the UK and Switzerland is approaching fast.

By 31 May 2013 UK residents with accounts or investments in Switzerland need to tell their bank whether they will be choosing to pay a one off levy to settle past UK tax liabilities or allow details of the previous activity on their accounts to be passed to HMRC.

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On 25 March 2013 Revenue & Customs Brief 04/13 was published to clarify the tax treatment applying to payments made to certain investors in collective investment schemes or policies of insurance where the payment did not arise directly as a distribution from the investment but was made to the investor by the fund manager or another intermediary party.

Read Revenue and & Customs Brief 04/13

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Company questions

Q: How do I register my company for the scheme?
A: There isn't a registration process as such. The company issues the shares, and then applies to HM Revenue & Customs (HMRC) for approval. Once approved, HMRC will give it claim forms for its investors so that they can claim their tax relief.

HMRC also offers an advance assurance facility, which allows companies to check in advance of an issue of shares whether the company is likely to meet the qualifying conditions or not.

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